Fox Closes Roku Deal, Paying $95.30 Cash Plus Stock per Roku Share

Fox Corporation said on Nov. 6 that it has completed its acquisition of Roku, the streaming platform used in more than 100 million households worldwide. Roku shares stop trading on the Nasdaq as of the same day.

Each Roku stockholder receives $95.30 in cash and 0.9799 shares of Fox Class A common stock for every Roku share held just before the closing. Under the merger agreement, that applies to both Roku Class A and Class B stock.

How the cash-and-stock payout splits ownership

Because part of the price was paid in Fox stock, former Roku investors now hold a slice of the combined company. Fox said its existing stockholders own about 74% of the outstanding Fox common stock after the deal, and former Roku stockholders own about 26%.

Fox did not state a total dollar value for the transaction in its closing announcement. The deal was financed partly with debt: Morgan Stanley Senior Funding led the debt financing, according to the company. In its list of risks, Fox mentions the combined company’s significant debt load and its ability to pay it down in line with management targets.

A new Fox division built around Roku and Tubi

Roku now sits inside a newly formed unit called FOX Digital Platforms. It also holds Fox’s free streaming service Tubi, the FOX One streaming product, Red Seat Ventures and other digital businesses.

Roku founder Anthony Wood joins the Fox board of directors and becomes Co-Chair of FOX Digital Platforms. Paul Cheesbrough takes the other Co-Chair seat and is CEO of the division.

Lachlan K. Murdoch, Fox’s Executive Chair and CEO, said the company’s first priority is to keep serving audiences and partners while preserving the openness of the Roku platform. Wood said Fox has “a deep respect for Roku’s culture” and that Roku will stay open to every content partner.

What it means for viewers, advertisers and content partners

Roku makes the operating system and devices that let TVs run thousands of streaming apps and channels, including services from Fox’s rivals. A common question after a media company buys a distribution platform is whether competing apps will be treated fairly. Fox’s statement says Roku will keep running as an open platform for the wider streaming industry, giving viewers choice and serving content partners. Those are commitments made by the company in a press release; it did not describe specific terms with any partner.

For advertisers, Fox is pitching a pairing of its live sports, news and local TV programming with Roku’s connected TV reach. Fox described itself as now one of the leading streaming businesses in the U.S., counting Roku, Tubi and FOX One.

Cost savings target and what to watch next

Fox expects about $400 million in annual run-rate cost savings, which it calls synergies, within two years of the closing. It also sees possible added revenue on top of that. The company expects the deal to add to free cash flow per share by the second full year after closing.

The release did not say how the savings would be reached or whether jobs would be affected. Its list of integration risks includes combining corporate functions, eliminating duplicate operations and keeping employees and managers on board. Fox shareholders, Roku’s former investors and Roku staff will learn more as the company reports results for the combined business.

Allen & Company was lead financial adviser to Fox, with Morgan Stanley and Goldman Sachs also advising and Weil, Gotshal & Manges as legal counsel. Qatalyst Partners was Roku’s exclusive financial adviser, and Goodwin Procter and Axinn served as Roku’s lawyers.

Source: PR Newswire