Fox Corporation's stock dived after it agreed to buy streaming platform Roku Inc. in a cash and stock transaction with an enterprise value of US$22 billion (A$31.1 billion) to expand its presence in the fast-growing connected television and streaming markets.
Fox Class B shares (NASDAQ: FOX) ended $8.96 (15.22%) lower at $49.96 on Monday (Tuesday AEST), capitalising the company at $21.74 billion.
The American media company will pay $160 per Roku share, consisting of $96 in cash and 0.9693 Fox Class A common shares, which represented a premium of 34% to Roku's closing share price.
The acquisition would combine Fox's portfolio of live sports, news and entertainment assets, including FOX News, FOX Sports, Tubi and FOX Television Stations, with Roku's streaming platform, which reaches more than 100 million households globally.
Fox Executive Chair and Chief Executive Officer Lachlan Murdoch described the transaction as a transformative step in the company's long-term strategy.
"This is a defining moment for FOX," Murdoch said in a press release.
"Bringing together the most valuable live content portfolio in video consumption with the preeminent streaming platform through which America watches it will transform the scope of our company into high-growth verticals and yield a step change in our overall growth profile."
Roku founder, Chairman and Chief Executive Officer Anthony Wood said the deal offered a significant premium to shareholders while also providing them with the opportunity to participate in the future upside of the combined company.
“I couldn’t be more excited about what we’ll accomplish together,” Wood said.
The combined company is expected to become the third-largest player in U.S. television by share of viewing, behind only YouTube and Walt Disney Company (Disney).
This is Fox's largest acquisition and its most significant move into streaming since purchasing ad-supported platform Tubi for $440 million in 2020.
Fox, which is controlled by the Murdoch family through its 36.2% ownership of Class B shares, was created in 2019 to own the former 21st Century Fox assets not purchased by Disney.
Roku shares (NASDAQ: ROKU) closed $2.76 (1.92%) lower at $140.90 on Monday, capitalising the company at $20.81 billion, before the deal was announced.
Fox shareholders will own about 73% of the combined company, while Roku shareholders will hold the remainder.
