Acquisitions

BAMTech

On September 25, 2017, the Company acquired an additional 42% interest in BAMTech, a streaming technology and content delivery business, from an affiliate of Major League Baseball (MLB) for $1.6 billion (paid in January 2018). The acquisition increased our interest from 33% to 75%, and as a result, we began consolidating BAMTech during the fourth quarter of fiscal 2017. The estimated acquisition date fair value of BAMTech is $3.9 billion.

BAMTech’s noncontrolling interest holders, MLB and the National Hockey League (NHL), have the right to sell their shares to the Company in the future. MLB can generally sell their shares to the Company starting five years from and ending ten years after the September 25, 2017 acquisition date at the greater of fair value or a guaranteed floor value ($563 million accreting at 8% annually for eight years). The NHL can sell their shares to the Company in fiscal 2020 for $300 million or in fiscal 2021 for $350 million. Accordingly, these interests are recorded as “Redeemable noncontrolling interests” in the Company’s Condensed Consolidated Balance Sheet.

The Company has the right to purchase MLB’s interest in BAMTech starting five years from and ending ten years after the acquisition date at the greater of fair value or the guaranteed floor value. The Company has the right to acquire the NHL interest in fiscal years 2020 and 2021 for $500 million.

The acquisition date fair value of the noncontrolling interests was estimated at $1.1 billion and calculated using an option pricing model. The MLB noncontrolling interest fair value generally reflects the net present value of MLB’s guaranteed floor value, while the NHL noncontrolling interest reflects their share of the $3.9 billion BAMTech value.

As a result of the MLB and NHL sale rights, the noncontrolling interests will generally not be allocated BAMTech losses. Prospectively, the Company will record the noncontrolling interests at the greater of (i) their acquisition date fair value adjusted for their share (if any) of earnings, losses, or dividends or (ii) an accreted value from the date of the acquisition to the earliest redemption date. The accretion of the MLB interest to the earliest redemption value in five years after the acquisition date will be recorded using an interest method. As of December 30, 2017, the redeemable noncontrolling interest subject to accretion would have had a redemption amount of $574 million if it were redeemed at that time. Adjustments to the carrying amount of redeemable noncontrolling interests will increase or decrease income available to Company shareholders through an adjustment to “Net income attributable to noncontrolling interests” on the Condensed Consolidated Statement of Income.

The Company is negotiating to provide the noncontrolling interest holder in ESPN a portion of the Company’s share of the BAMTech direct-to-consumer sports business at a price that is consistent with the amount the Company invested. If such transaction is finalized, their investment would be recorded as a noncontrolling interest transaction when consummated.

We have preliminarily allocated $3.6 billion of the purchase price to goodwill (approximately half of which is deductible for tax purposes) with the remainder primarily allocated to identifiable intangible assets. We are in the process of finalizing the valuation of the acquired assets, assumed liabilities, and noncontrolling interests.

The revenue and costs of BAMTech included in the Company’s Condensed Consolidated Statement of Income for the quarter ended December 30, 2017 were both approximately $0.1 billion.

Twenty-First Century Fox

On December 14, 2017, the Company and Twenty-First Century Fox, Inc. (“21CF”) announced a definitive agreement (the “Merger Agreement”) for the Company to acquire 21CF. Prior to the acquisition, 21CF will separate certain of its businesses, most notably, the FOX Broadcasting network and stations, FOX News Channel, FOX Business Network, FS1, FS2 and Big Ten Network into a newly listed company (“New Fox”) that will be spun off to 21CF shareholders. Prior to the spin-off, New Fox will pay a dividend to 21CF in the amount of $8.5 billion. Following the spin-off, the significant remaining businesses will include the 21CF film and television studios, certain cable networks (including FX and National Geographic) and 21CF’s international TV businesses.

Under the terms of the Merger Agreement, shareholders of 21CF will receive 0.2745 of a Company share for each 21CF share they hold subject to a two-way adjustment based on an estimate at closing of certain tax liabilities arising from the spin-off and certain other transactions contemplated by the Merger Agreement. In the event that the final estimate of tax liabilities is lower than the estimate used to set the exchange ratio, the first $2.0 billion of that adjustment will be made by a net reduction in the amount of cash dividend to 21CF from New Fox. Based upon 21CF shares outstanding as of September 30, 2017, the Company would be required to issue approximately 515 million new shares, a value of approximately $52.4 billion at the time the exchange ratio was agreed. The value at which the Company will record the equity consideration will be based upon the stock price on the date the transaction closes. In addition, the Company will assume 21CF’s net debt, which was approximately $13.7 billion as of September 30, 2017 (approximately $20.0 billion of debt less approximately $6.3 billion in cash).

The Boards of Directors of the Company and 21CF have approved the transaction, which is also subject to approval by 21CF and the Company’s shareholders, clearance under the Hart-Scott-Rodino Antitrust Improvements Act, a number of other non-United States merger and other regulatory reviews, the receipt of a tax ruling from the Australian Taxation Office and certain tax opinions with respect to the treatment of the transaction under U.S. and Australian tax laws, and other customary closing conditions.

Under the terms of the Merger Agreement, Disney will pay 21CF $2.5 billion if the merger is not consummated under certain circumstances relating to the failure to obtain approvals, or if there is a final, non-appealable order preventing the transaction, in each case, relating to antitrust laws, communications laws or foreign regulatory laws. If the Merger Agreement is terminated under certain other circumstances relating to changes in board recommendations and/or alternative transactions, the Company or 21CF may be required to pay the other party approximately $1.5 billion.

Goodwill

The changes in the carrying amount of goodwill for the quarter ended December 30, 2017 are as follows:



	Media Networks		Parks and Resorts		Studio Entertainment		Consumer Products & Interactive Media		Unallocated ⁽¹⁾			Total
Balance at Sept. 30, 2017	$	16,325	$	291	$	6,817	$	4,393	$	3,600		$	31,426
Acquisitions	—		—		—		—		—			—
Dispositions	—		—		—		—		—			—
Other, net	7		—		7		2		(12		)	4
Balance at Dec. 30, 2017	$	16,332	$	291	$	6,824	$	4,395	$	3,588		$	31,430


⁽¹⁾	Goodwill will be allocated to the segments once the BAMTech purchase price allocation is finalized.