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News Corporation (NWSA - Analyst Report), a diversified global media company, is acquiring The Walt Disney Company’s (DIS - Analyst Report) stake in their 16 year old Asian sports joint venture “ESPN STAR Sports (ESS)”. However, the financial terms of the deal were not disclosed.
ESS, a 50/50 joint venture between Disney’s ESPN and News Corporation, provides Asian sports fans diverse collection of sports programs across 24 countries in Asia through 28 networks.
As per the agreement, News Corporation will acquire ESPN’s 50% stake in ESS, which is subject to regulatory approvals. Until then, ESS will be jointly managed by the two companies.
ESS with its right mix of exclusive sporting licenses with top sporting leagues emerged as an industry leader in the pay-TV industry. With the new deal, News Corporation will gain complete control over ESS, which will enhance its position in sports programming thus bringing in incremental revenues through advertising and subscriptions.
Further, owing to a mandatory shift to a digital addressable system in India, the move better positions both the companies to independently manage their brands and generate positive cash flows through significantly expanding digital opportunities in the region.
News Corporation strives to add diverse revenue streams to hedge against economic volatility. The company is focusing on the emerging markets to expand its media business, since these regions have millions of viewers.
Further, the companies announced that Manu Sawhney, Managing Director of ESS, will be replaced by Peter Hutton, currently SVP of Sports for FOX International Channels (FIC).
Currently, we maintain a long-term ‘Neutral’ recommendation on the stock. Moreover, News Corporation holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
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