According to the news report by Bloomberg, the Walt Disney Co. and 21st Century Fox Inc. deal is expected to win approval from regulators in Brazil.
The deal in which Disney is purchasing Fox’s entertainment businesses for $71 billion is expected to be approved after the two companies agreed to sell Fox Sports Channel as well as its program rights in Brazil.
Cade, the Brazilian regulatory agency had objected to the deal because if Disney owned ESPN as well as Fox Sports, then there would be only one other competitor in the space. This would have given Disney too much of control over the market.
According to sources that wished to remain anonymous, both Fox as well as Disney agreed to sell the sports channel so that they would get approval from Cade for their deal. The Brazilian agency is expected to give its final decision on Wednesday, February 27.
The objection raised by the Brazilian regulator was one of the major obstacles facing the finalization of the deal between Disney and Fox. Earlier, the two companies had already agreed to sell off 22 of Fox’s regional sports networks in the United States after the American Justice Department had stated that Disney’s ownership of ESPN as well as these 22 channels would give the entertainment giant too much sway over sports broadcasting.
Disney also agreed to sell off the 50% stake it has in European A+E Networks so that regulators in the European Union will allow the deal to go through.
However, in Brazil, the sports networks were only part of the concern that the country’s regulator had with the Disney – Fox deal. This is because the broadcast rights of Fox Sports also include the airing of the major South American soccer (football) tournament called Copa Libertadores.
The two companies faced opposition to the deal from Globo Comunicacao e Participacoes SA in Brazil. Additionally, the world’s biggest producer of Spanish based television content, Grupo Televisa SAB in Mexico also raised similar concerns about the merger leading to Disney having too much power over sports media.
In fact, Globo and Grupo Televisa would have been Disney’s only competition in the two countries in the sports arena if the divestments did not take place.
The demand for the sale of the Fox Sports channels in the two countries was influenced by the US Justice Department’s demands.
In the two months that the deal was being assessed by the Cade board, the two companies attempted to negotiate less harsh measures. In fact, Bob Iger, the Chief Executive Officer of Disney, visited the country earlier this month in the hopes of resolving this issue.
Brazil was not the only country with concerns with regard to sports broadcasting rights. Earlier this month, the two companies had to also discuss the decision with Mexican regulators, who were also looking at similar solutions before approving the deal.
Last week, Disney and Fox stated that are also willing to agree to the same terms with Mexico so that they can win regulatory approval from the Latin American country. The expectation is that the Mexican telecom regulator will demand the sale of the Fox Sports network.
In both Brazil as well as Mexico, the final details of the negotiation are underway and the final decision is expected to be made today on February 27. However, the final decision may be different from what is expected.
For example, it is not clear – according to sources – whether the two countries’ regulators would demand the sale of the sports programming rights (such as those for football games) in addition to the actual sports channels themselves.