Fox has reached an agreement to purchase the streaming leader Roku in a transaction involving cash and stock valued at around $22 billion US, inclusive of debt. This acquisition will grant Fox entry into over 100 million households worldwide, access to the Roku channel, and its first-party data. Fox, known for its extensive sports, news, and entertainment network, as well as the acquisition of Tubi in 2020, stands to benefit from this deal.
Roku’s founder, Anthony Wood, previously associated with Netflix in the early 2000s during the transition from DVD rentals to video streaming. Following its spin-off from Netflix, Roku introduced its first set-top box in 2008. Wood, now chairman and CEO of Roku, was inspired to delve into technology by his passion for recording and watching the TV series “Star Trek.”
As a pioneer in streaming device technology for televisions, Roku’s revenue primarily stems from advertising and subscription fees from apps on its platform, including the Roku Channel. Notably, advertising forms the largest revenue segment, amounting to $613 million in the first quarter, marking a 27% increase year-over-year.
Both companies disclosed that Roku will continue to operate as an open and partner-friendly platform. Together, Fox and Roku anticipate becoming the third-largest player in U.S. television viewership. Lachlan Murdoch, Fox CEO, expressed optimism about merging live news and sports content with a high-viewership streaming platform, enhancing exposure to advertising and streaming subscriptions.
Wood highlighted the significant potential this merger presents for accelerating innovation and scaling operations. Post-transaction, Wood will retain an active role within the company and join the Fox board of directors.
Acquiring Roku positions Fox strongly in the ad-supported streaming sector, bolstering control over content discovery, data, and monetization as TV viewing trends away from traditional channels. The deal structure entails Roku shareholders receiving $96 US in cash and approximately 0.97 Fox Class A shares per share held, equating to $160 US per share.
Upon completion of the transaction, existing Fox shareholders are projected to possess roughly 73% of the combined entity, with Roku shareholders holding the remaining 27%. Anticipated to conclude in the first half of the upcoming year, the deal necessitates approval from both Fox and Roku shareholders, as well as regulatory clearance.
While Fox’s stock experienced a decline pre-market, Roku’s shares saw a slight increase following the announcement.