Disney-Fox Deal: How Secret, ‘Smooth and Cordial’ Negotiations Drove a Blockbuster Acquisition

The spark came in August over a couple of glasses of wine, as two media moguls chewed the fat about the state of the business.

Disney chief Bob Iger and 21st Century Fox chairman Rupert Murdoch were having a casual get-together at Murdoch’s Moraga Estate winery in Bel-Air. They found themselves in agreement about trends they were observing that were heavily impacting their respective TV and film businesses. Iger left the winery with a feeling that Murdoch might be open to a deal that could be transformative to both Disney and 21st Century Fox.

“We were talking about our businesses and the industry generally and the forces of disruption that are happening,” Murdoch told Sky News. “We genuinely like each other and respect each other,” Iger told CNBC.

A few weeks later, Iger called Murdoch for a more serious conversation about exploring the possibility of a merger. Iger’s hunch was right. Murdoch was game. Really game.

A little more than two months after Iger’s call, top Disney and Fox executives rose before dawn on Dec. 13 to unveil the $52.4 billion acquisition pact before the stock market opened. The news release came with a two-shot of Iger and Murdoch, all smiles and arm-in-arm atop a skyscraper with London’s St. Paul’s Cathedral in the background.

Sources close to the situation said the Disney-Fox negotiations were held in secret at the highest levels of both companies. Prominent senior executives at both shops were left out of the loop in an effort to keep the discussions quiet. There were no outward signs that Fox was considering a sale – no scramble to gather financial data going back years, no hasty efforts to assemble Power Point presentations on the company’s various divisions.

The cover was blown after about a month when CNBC’s David Faber reported Nov. 6 that Disney and Fox had been in conversations. The industry was stunned. Murdoch a seller? In what world!

The Disney-Fox discussions had quieted down briefly around the time of CNBC’s report, but the talks resumed not long afterward. At that time, Comcast knocked on Fox’s door to express interest in the same assets that Disney had zeroed in on. Sony Pictures Entertainment also lobbed an informal inquiry about whether Fox was engaging with other bidders. Verizon, which had floated an overture to 21st Century Fox earlier in the year, also was seen as a contender if Fox initiated an auction process.

The Murdochs, however, seemed focused on a deal with Disney. Comcast said as much in a statement issued Dec. 11 declaring that they were no longer in the Fox hunt, after it was abundantly clear that Disney was racing to the finish line. “We never got the level of engagement needed to make a definitive offer,” Comcast asserted.

Iger described the negotiations as “smooth and cordial” to CNBC. But he still counts himself among those who are surprised the Murdochs would part with so many of their crown jewels.

“I thought it was a long shot but the more I thought about it, the more Rupert thought about it, the more we talked about it, the more it made sense,” Iger told CNBC. “If you were to ask me in August as to whether I would get to this point, I’m not sure that I would have bet that I would have.”

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