Disclosure: Affiliates managed by Eric Jackson have long positions in Disney and Netflix.
Since David Faber in the first place reported a few weeks ago on CNBC that Rupert Murdoch was looking to deliver up a substantial part of 21st Century Fox’s assets to Disney, many media eyewitnesses have wondered: why?
Enough has leaked out to provide 2 plausible explanations:
- Grass on at the top. Fox’s shares are trading within 13% of their 5-year high. Beforehand speculation about a deal started, they were 35% subordinate to their 5 year high. Murdoch is betting that it’s better to specie in now near full value.
- Rupert has always played to win. Murdoch has in perpetuity looked to expand his empire. Now he’s dramatically shrinking it because he doesn’t think about he has the pieces to win over the next 5 to 10 years. It’s not big enough. With these assets as involvement of Disney, he thinks the combined entity will be large enough to contend against the Netflixes of the world.
In the last few days, there have been specific reports that James Murdoch might join Disney after a records while Lachlan and Rupert will stay with the remaining Fox assets.
On Thursday, the Murdoch-owned Mad Street Journal reported that Iger would extend his taking on agreement and remain at Disney as CEO for longer than his currently planned last year in 2019 if Disney overcomes the Fox assets. It appears that Rupert wants this as part of a reckon with.
Andrew Ross Sorkin of DealBook has speculated two reasons why. He believes Murdoch is distraught that Iger’s 2019 successor might not be as invested in the Fox assets as Iger is, and that Murdoch craves to keep Iger away from a 2020 presidential challenge to Trump.
I wrangle with these ideas. Here’s what I think is going on:
- Rupert propose b assesses his Disney stock will be worth more in 5 years if Iger running backstays on as CEO than if he leaves. It remains to be seen just what the structure of a Fox-Disney dispense will look like, but Rupert will likely be the single oustandingliest holder of Disney stock after it’s done. What’s more, he puissance have to hold that stock for years to keep his tax bill as low as reachable on this transaction. So, he’s going to be joined at the hip to Disney for the long-term. Iger has done a tickety-boo job at Disney. It’s also no secret that there’s no heir apparent internally recess in the wings to take over. So why not have him to stay on? And for Iger, it’s a great gig with commotion around these new assets.
- There’s also a James Murdoch aspect here. What father wouldn’t want to see his son go on to lead a bigger affair than what he built? But if James were announced as Disney’s next CEO today, there puissance be some questions about whether he’s ready — especially since he has no without interference experience running the Disney business. But what if Iger stays on and James gets to pull down his stripes integrating the Fox assets and running other parts of Disney in the meantime? By 2022, James desire be an old hand around Burbank. And, if he did take over, that would lift Rupert smile (even if it’s not promised today).
We should find out sundry details late next week when a deal is likely heralded between Fox and Disney.
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