June 15 (Reuters) – Fox Corp FOXA.O is buying Roku ROKU.O in a cash-and-stock deal valued at about $22 billion in a bet that the top TV streaming platform will strengthen its advertising business and expand online reach for its sports and news content.
The deal, announced on Monday, gives Fox access to the more than 100 million households using Roku’s streaming platform, potentially helping the cable TV-reliant media company better target ads, take on competition and reduce reliance on traditional distribution.
It is Fox’s first major acquisition since CEO and Chairman Lachlan Murdoch cemented control over the media empire his father Rupert Murdoch built, following a family settlement last year.
CEO Murdoch called the Roku deal a “defining moment” for Fox that brings “together the most valuable live content portfolio in video consumption with the preeminent streaming platform through which America watches it.”
Evan Agostini/Invision/APEvan Agostini/Invision/AP
Fox shares fell nearly 17% in early trading, likely on concerns about stock dilution from the deal. Roku ticked down 2.5% to $140.1 and was trading below the offer price of $160 per share.
One of the first companies to bring streaming platforms like Netflix and YouTube to television through connected devices and smart TVs, Roku’s business is largely driven by advertising and subscription revenue from streaming apps on its platform.
The company also operates the free-to-watch Roku Channel, which will be kept separate from Fox’s ad-supported streaming platform, Tubi.
Roku’s purpose built operating system helps keep hardware manufacturing costs low, giving it an edge in the industry as memory prices soar, its CEO and founder Anthony Wood said.
Under the deal, Roku investors will receive $96 in cash and about 0.97 Fox Class A shares for each share held, valuing the offer at $160 per share. That represents a 33.7% premium to Roku’s close on Thursday, a day before publications including Reuters reported it was exploring options including a sale.
Fox is no stranger to Roku. In 2020, it funded its $440 million acquisition of Tubi by selling a 5% stake in Roku that it had held since 2013.
Streaming Boost
While Roku has benefited from consumers leaving traditional TV, Fox has grappled with cord-cutting and accelerated its digital push through launches such as its Fox One subscription service last year.
Rising competition spurred by industry consolidation is also a challenge. Last week, the U.S. Justice Department’s Antitrust Division cleared Paramount Skydance Corp’s PSKY.O planned $110 billion acquisition of Warner Bros. Discovery WBD.O, a deal that would create an industry giant with major studios and networks such as CNN and CBS.
Buying Roku would allow Fox to compete better, with the combined company set to be the third-largest player in U.S. television by viewership.
Fox has seen strong demand for its live sports content which includes National Football League games, Major League Baseball and the ongoing FIFA World Cup.
“This (deal) gives Fox greater control over discovery, data and monetization at a time when TV viewing continues to shift away from traditional channels,” PP Foresight analyst Paolo Pescatore said.
“Bringing together premium content, live sports, advertising and platform distribution under one roof creates a compelling proposition.”
Fox shareholders will own roughly 73% of the combined company after closing, with Roku investors holding the rest.
The boards of both companies have unanimously approved the transaction, which is expected to close in the first half of calendar year 2027 and generate about $400 million in annual cost savings.
The deal will include roughly $14.6 billion in cash, with the rest paid in stock, adding about $8.3 billion in debt to Fox’s balance sheet.
Allen & Company is the lead financial adviser to Fox, while Qatalyst Partners is serving as exclusive financial adviser to Roku.
(Reporting by Harshita Mary Varghese in Bengaluru, additional reporting by Anhata Rooprai; Editing by Devika Syamnath)