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Disney’s Family planning

Jul 23, 2001  •  Post A Comment

The Walt Disney Co. is in serious negotiations to purchase the Fox Family Channel.
It is likely the deal will be valued at between $5 billion and $5.5 billion, sources said. In the most recent discussions between Disney and Fox, the Fox Kids Network would likely be excluded from the deal.
Fox Family Worldwide-parent of the Fox Family Channel and Fox Kids Network-was put up for sale at the end of last year when co-owner and company Chairman Haim Saban exercised an option to sell his 49.5 percent stake in the company to his partner News Corp. Rupert Murdoch’s company, which is focusing its financial resources on a possible deal with DirecTV, decided to then try to sell all of Fox Family Worldwide.
If the Disney deal is consummated, the Fox Kids Network would likely be managed by a Saban-News Corp. partnership.
A Disney acquisition of the Fox Family Channel could be announced as soon as this week, sources said, though one executive cautioned that as of late Friday the deal was still “in process” and not “totally closed,” leaving both sides wiggle room to call off the pact at the last minute.
“As of [July 19], we were being told that the same cast of [corporate] characters was interested” in purchasing Fox Family, said one Family Channel executive, referring to Disney, Viacom and AOL Time Warner. But if the channel is bought by Disney, this executive said, “That’s a great fit. It would be my preference.”
Spokespeople at Disney and at Disney’s ABC Cable Networks Group declined comment. A News Corp. spokeswoman had no comment.
Where Fox Family, which is in more than 81 million homes, will end up inside the Disney corporate structure is still to be determined, but one expectation is that any entertainment cable channel would end up inside the ABC Cable Networks Group, which was recently reorganized, partly with an eye toward maximizing global brand value.
“An ad-supported family channel is a perfect complement to Disney’s other cable properties,” said one cable-programming executive at a rival network. “I’d imagine that Disney envisions this as a much more broad-based channel; what they have now are really niche networks, including the Disney Channel.”
If the Disney deal is consummated, “I’m going to be real interested to see what they do with Pat Robertson’s `700 Club,”’ said one media agency manager.
Mr. Robertson’s program airs on Family at 10 a.m., 11 p.m. and 2 a.m. (ET). Mr. Robertson used to own the Family Channel, and when he sold it to News Corp., part of the agreement was that the “700 Club” be broadcast three times a day.
News Corp. had been looking for about $6 billion for the entire Fox Family Worldwide package. Last month, Merrill Lynch analyst Jessica Reif Cohen valued the Fox Family Channel at $3.7 billion, not including Fox Kids Europe or the Fox Kids library. Add that in, and Ms. Reif Cohen valued it at $4.1 billion, not including $1.8 billion in company debt.
Sources said the Disney transaction is likely to be a cash deal. Subtract the debt, and News Corp. and Mr. Saban will split about $3.5 billion, minus fees to their bankers and advisers. Morgan Stanley Dean Witter is assisting Mr. Saban; Bear Stearns is on the News Corp. side.
All of Disney’s cable channels, with the exception of ESPN (80 percent owned by Disney, 20 percent owned by Hearst), report through the ABC Cable Networks Group. The wholly owned channels inside the group include the Disney Channel (in nearly 70 million homes), Toon Disney (Disney’s all-animation channel that is in approximately 17 million homes) and SoapNet (in approximately 5 million homes). Also, the cable channels in which Disney has a financial interest report to the group; they include Lifetime Television, A&E Television Network, The History Channel and its various sister channels and E! Entertainment Television.
One Disney executive said it is not often the company buys a cable channel, “but then it’s not often that a broadly distributed channel comes up.”
Added another cable executive of a major programming service: “The big enigma I find is that GE didn’t make a big effort to get it. They can afford it, but they never want the dilution to their stock. They’ve always wanted a broad-based cable network like [The Family Channel], but they’ve never been willing to pay the premium price you have to pay to get one.”