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Walt Disney Co 8-K Report, Material Agreement (May 3, 2019)

Filed May 3, 2019For Securities:DIS

Summary

The Walt Disney Company (Disney) has entered into a definitive agreement to sell its interests in the regional sports networks (RSNs) to Diamond Sports Group, LLC, a subsidiary of Sinclair Broadcast Group, Inc., for $9.6 billion in cash. This sale is a crucial step in divesting all RSNs acquired through the Twenty-First Century Fox acquisition, as mandated by regulatory bodies, specifically the U.S. Department of Justice (DOJ). The transaction includes the sale of entities like Fox Sports Net and associated regional networks, and is expected to be completed pending customary closing conditions and regulatory approvals. This divestiture will allow Disney to complete the integration of its Fox assets while complying with antitrust requirements. The $9.6 billion cash infusion from this sale will bolster Disney's financial position, potentially aiding in funding its strategic initiatives, including the integration of the acquired entertainment and sports businesses. Investors should monitor the satisfaction of closing conditions, particularly DOJ approval, and the timeline to completion, which has an outside date of February 3, 2020.

Key Highlights

  • 1Disney to sell regional sports networks (RSNs) to Diamond Sports Group (Sinclair Broadcast Group) for $9.6 billion cash.
  • 2This sale is a regulatory requirement stemming from the Twenty-First Century Fox acquisition, specifically to satisfy DOJ approval.
  • 3The divestiture includes a significant portfolio of RSNs across the U.S., such as Fox Sports Net and various regional channels.
  • 4The transaction is subject to customary closing conditions, including regulatory approvals and the absence of adverse legal judgments.
  • 5An outside closing date is set for February 3, 2020, with provisions for termination and a potential termination fee of $864 million payable by the buyer if Disney terminates due to buyer's failure to close.
  • 6Disney will provide certain transition services and license intellectual property to the RSNs post-closing.
  • 7The sale proceeds of $9.6 billion represent a significant cash inflow for Disney.

Frequently Asked Questions

This filing announces a material definitive agreement for Disney to sell its acquired regional sports networks (RSNs) for $9.6 billion in cash to Diamond Sports Group (a subsidiary of Sinclair Broadcast Group). This sale is a critical step to comply with regulatory requirements from the acquisition of Twenty-First Century Fox, ensuring the divestiture of these sports assets to gain antitrust approval.

Disney is selling the regional sports networks as a condition imposed by the U.S. Department of Justice (DOJ) as part of the regulatory approval process for Disney's acquisition of Twenty-First Century Fox. This divestiture ensures that Disney does not hold a monopoly or undue concentration of sports broadcasting assets.

The sale is expected to bring in $9.6 billion in cash. This significant cash inflow can be used to reduce debt, fund ongoing operations, invest in Disney's streaming services (like Disney+), or for other strategic corporate purposes, thereby strengthening Disney's overall financial position.

The sale is subject to several conditions, including the approval of the U.S. Department of Justice (DOJ) for the transaction and the buyer. Other conditions include the absence of any laws or judgments preventing the sale, the accuracy of representations and warranties made by both parties, the performance of obligations, and the absence of a material adverse effect on the RSN business. Regulatory approvals are paramount.