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UK-based global sports streaming platform DAZN has struck a deal to acquire the majority of shares in Foxtel from News Corporation (ASX: NWS) and Telstra (ASX: TLS) for an enterprise valuation of $3.4 billion, which represents a multiple of seven times the Australian pay TV company's most recent annual earnings.
The cash-and-scrip deal will give News Corp a 6 per cent stake in DAZN as well as a seat on its board of directors, while Telstra will receive a 3 per cent stake in DAZN.
News Corp and Telstra currently hold stakes of 65 per cent and 35 per cent respectively in Foxtel.
Under the terms of the agreement, outstanding shareholder loans of $578 million owed to News Corp will be repaid in full in cash at closing and Foxtel’s current debt will be refinanced. Meanwhile, Telstra will receive $128 million in cash for the repayment of shareholder loans.
Foxtel, which has 4.7 million subscribers, will continue to be led by CEO Patrick Delany and his management team as part of DAZN's plan to maintain its "local character".
"Australians watch more sport than any other country in the world, which makes this deal an incredibly exciting opportunity for DAZN to enter a key market, marking another step in our long-term strategy to become the global home of sport," says DAZN chief executive officer Shay Segev.
"Foxtel is a successful business that has undergone a remarkable digital transformation in recent years, and we are confident that our global reach and relentless pursuit of innovation will continue to drive the business forward and ensure long-term success.
"We are committed to supporting and investing in Foxtel's television and streaming services, across both sports and entertainment, using our world-leading technology to further enhance the viewing experience for customers."
Foxtel's chairman Siobhan McKenna says the agreement is an international recognition of the transformation of Foxtel from an incumbent pay TV operator to a sports and entertainment digital and streaming leader.
"Over the last seven years the Foxtel team, with the strong support of News, have achieved an extraordinary turnaround in an intensely competitive environment," says McKenna.
Foxtel CEO Patrick Delany describes the announcement as a natural evolution for the group, having reinvented it over the past five years as Australia's "most dynamic technology-led streaming company".
"Kayo and Foxtel provide Australian sports fans with access to the best Australian and international sport and shows, including AFL, NRL and Cricket with 4.7 million subscribers," he says.
"We are excited by DAZN's commitment to the Australian market. They are experts in the sports media business and can play a significant role in supporting Foxtel as the business grows its streaming capabilities, bringing a bigger and better service to customers across entertainment, news and sport. They are a perfect match for us as we look toward this next era of growth.
"After launching Kayo later in 2019 and BINGE in 2020, today we are the largest Australian-based streamer of sport and entertainment, we have stabilised our Foxtel base and launched Hubbl to help consumers find all the streamed content they love all in one place," he says, adding this would not have been possible without the support and encouragement of News Corp.
The agreement follows a strategic and financial review of Foxtel as part of News Corp’s ongoing efforts to optimise its portfolio and simplify the company's structure.
"This agreement is a victory for News Corp shareholders, DAZN, and sport fans in Australia and around the world," says News Corp chief executive Robert Thomson.
"Foxtel has been transformed into a genuine digital and streaming leader in Australia, and we believe DAZN is the right owner to take the business to the next level with their technological capabilities, global footprint and compelling sports rights.
"This transaction also allows News Corp to focus on our other growth pillars of Dow Jones, Digital Real Estate and Book Publishing, while benefiting from repayment of our shareholder loans and an improved credit profile. We are proud to be a long-term partner of DAZN and its talented team."
Telstra, which has maintained a minority investment in Foxtel following its combination with Fox Sports in 2018, has welcomed the transformation of the Foxtel business in recent years with new streaming offerings including Kayo and Binge.
"“Now is the right time for this change. Foxtel is a world-class streaming service, and I look forward to its continued success under DAZN’s ownership," says Telstra CEO Vicki Brady.
The transaction is not expected to have a material impact on Telstra’s FY25 guidance.
Completion is expected in the first half of 2025 subject to regulatory approvals.
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