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Fox Corp. has agreed to buy streaming service pioneer Roku in a cash-and-stock deal worth about $22 billion, including debt.
The deal will give Fox access to more than 100 million homes worldwide, as well as the Roku channel and its original data. Fox oversees a major sports, news and entertainment network, as well as Tubi, which it acquired in 2020.
Roku founder Anthony Wood first worked at Netflix in the early 2000s as that company tried to shift its focus from DVD rentals to video streaming. Roku was chased by Netflix, however, the company released its first set-top box in 2008.
Wood, who is the chairman and CEO of Roku, said that what motivated him to pursue this technology was his desire to record and play his favorite show, Star Trek.
One of the first companies to bring streaming platforms like Netflix and YouTube to televisions 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 a free-to-air Roku channel.
Advertising is its largest segment, with revenue of $613 million in the first quarter, up 27 percent year over year.
The companies said Monday that Roku will continue to operate as an open, partner-friendly platform. Fox and Roku said the combined company would be the third-largest player in US television by viewership share.
Fox Corp. CEO Lachlan Murdoch said in a statement that the business combination would combine Fox’s live news and sports content into a multi-viewer platform. It will also give Fox more exposure in advertising and streaming subscriptions.
“The combination with Fox is an incredible opportunity to accelerate our vision, grow rapidly and innovate for viewers, partners and advertisers in an unprecedented way,” Wood said in prepared remarks.
Wood will have a continuing role in the company and will join Fox’s board of directors after the transaction closes.
Analyst Paolo Pescatore with PP Foresight says buying Roku gives Fox more heft in the ad-supported broadcast space.
“This gives Fox greater control over acquisition, data and monetization at a time when TV viewing continues to move away from traditional channels,” Pescatore said.
“Combining premium content, live sports, advertising and platform distribution under one roof creates a compelling proposition.”
Fox will pay $96 in cash and 0.9693 shares of Class A common stock for each Roku A and Class B share outstanding. The transaction is valued at $160 per Roku share.
Existing Fox shareholders are expected to own about 73 percent of the combined company and Roku shareholders will own about 27 percent, once the deal closes.
The deal is expected to close in the first half of next year. It still needs Fox and Roku shareholder approval and regulatory approval.
Fox stock fell before the market opened, while Roku shares edged higher.
