On March 20, 2019, the Company acquired the outstanding capital stock of Twenty-First Century Fox, Inc. (“21CF”), a diversified global media and entertainment company. Prior to the acquisition, 21CF and a newly-formed subsidiary of 21CF (“New Fox”) entered into a separation agreement, pursuant to which 21CF transferred to New Fox a portfolio of 21CF’s news, sports and broadcast businesses and certain other assets. 21CF retained all of the assets and liabilities not transferred to New Fox, including the Twentieth Century Fox film and television studios, certain cable networks and 21CF’s international TV businesses; these remaining assets and businesses are held directly or indirectly by the acquired 21CF entity.

The acquisition purchase price totaled $69.5 billion, of which the Company paid $35.7 billion in cash and $33.8 billion in Disney shares (307 million shares at a price of $110.00 per share).

We acquired 21CF to enhance the Company’s position as a premier, global entertainment company by increasing our portfolio of creative assets and branded content to be monetized through our film and television studio, theme parks and direct-to-consumer offerings.

In connection with the acquisition, outstanding 21CF performance stock units and restricted stock units were either vested upon closing of the acquisition or replaced with Disney restricted stock units (which require additional service for vesting). The purchase price for 21CF includes approximately $340 million related to 21CF awards that were settled or replaced in connection with the acquisition. Additionally, the Company recognized compensation expense of $184 million related to awards that were accelerated to vest upon closing of the acquisition. Approximately $218 million of compensation expense related to awards that were replaced with Disney restricted stock units and will be recognized over the remaining service period of up to approximately two years.

As part of the 21CF acquisition, the Company acquired 21CF’s 30% interest in Hulu increasing our ownership to 60%. As a result, the Company began consolidating Hulu and recorded a one-time gain of $4.9 billion from remeasuring our initial 30% interest to its estimated fair value, which was determined based on a discounted cash flow analysis.

On April 15, 2019, Hulu redeemed Warner Media LLC’s (WM) approximate 10% interest in Hulu for approximately $1.4 billion. The redemption was funded via a loan from the Company to Hulu. Pursuant to the redemption agreement, Hulu’s remaining noncontrolling interest holder, NBC Universal (NBCU), may elect to participate in the redemption by contributing its proportionate share of the purchase price to Hulu. NBCU must make this election within 90 days from the transaction date. If NBCU elects to participate, the Company’s interest in Hulu will increase to 67%. If NBCU does not elect to participate, the Company’s interest in Hulu will increase to 70%.

Upon closing of the acquisition, the Company exchanged new Disney notes for outstanding notes issued by 21^st Century Fox America, Inc. (“21CFA Notes”) with a principal balance of $16.8 billion (see Note 6).

The Company also assumed 21CF commitments totaling $31 billion, of which $22 billion relate to the Regional Sports Networks (see Discontinued Operations below). The remaining commitments are primarily for sports and entertainment programming rights. In addition, we entered into commitments with New Fox totaling $0.3 billion, primarily for the lease of production facilities and office space. Hulu commitments total $3.4 billion and relate primarily to programming rights.

The Company is required to allocate the 21CF purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values. The excess of the purchase price over those fair values is recorded as goodwill. The Company is in the process of obtaining additional information necessary to finalize the valuation of the assets acquired and liabilities assumed including income tax related amounts. Therefore, the preliminary fair values set forth below are subject to adjustment as additional information is obtained and the valuations are completed.



	Estimated Fair Value
Cash and cash equivalents	$	25,666
Receivables	4,746
Film and television costs	20,120
Investments	1,471
Intangible assets	20,385
Net assets held for sale	11,704
Accounts payables and other liabilities	(10,753		)
Borrowings	(21,723		)
Deferred income taxes	(6,497		)
Other net liabilities acquired	(3,865		)
Noncontrolling interests	(10,638		)
Goodwill	43,751
Fair value of net assets acquired	74,367
Less: Disney’s previously held 30% interest in Hulu	(4,860		)
Total purchase price	$	69,507

Intangible assets primarily consist of MVPD agreements, advertising networks and trade names with estimated useful lives ranging from 2 to 40 years and a weighted average life of 12 years.

The goodwill reflects the value to Disney of increasing our global portfolio of creative assets and branded content to be monetized through our film and television studio, theme parks and direct-to-consumer offerings.

The fair value of investments acquired in the acquisition include $1.2 billion of equity method investments and $0.3 billion of equity investments. Equity method investments primarily consist of a 50% interest in Endemol Shine Group, a global multi-platform content provider and a 30% interest in Tata Sky Limited, a satellite operator in India).

The fair value of the assets acquired includes current trade receivables of $4.7 billion. The gross amount due under the contracts is $4.9 billion, of which $0.2 billion is expected to be uncollectible.

For the six months ended March 30, 2019, the Company incurred $211 million of acquisition-related expenses of which $111 million is included in Selling, general, administrative and other and $100 million related to financing fees is included in Interest expense, net in the Company’s Condensed Consolidated Statement of Income.

The revenues and net loss from continuing operations (including purchase accounting amortization) of 21CF and Hulu included in the Company’s Condensed Consolidated Statement of Income since the date of acquisition through March 30, 2019 is $518 million and $115 million, respectively.



	Six Months Ended
	March 30, 2019		March 31, 2018
Revenues	$	38,764	$	38,651
Net income	4,000		9,472
Net income attributable to Disney	4,119		9,609
Earnings per share attributable to Disney:
Diluted	$	2.28	$	5.27
Basic	2.29		5.30

These pro forma results include adjustments for purposes of consolidating the historical financial results of 21CF and Hulu (net of adjustments to eliminate transactions between Disney and 21CF, Disney and Hulu and Hulu and 21CF). These pro

formas also include an adjustment of $2.1 billion for both the six months ended March 30, 2019 and 2018, to reflect the preliminary estimate of incremental amortization as a result of recording film and television programming and production costs and finite lived intangible assets at fair value. Interest expense was adjusted by $259 million to reflect the cost of borrowings to finance the 21CF acquisition for both the six months ended March 30, 2019 and 2018, which assumed an estimated weighted average interest rate of 3.5%. The six months ended March 30, 2019 and 2018, include a benefit of $109 million, to reflect lower interest expense using an effective interest method to adjust 21CF’s long-term debt to preliminary fair value.

Additionally, the pro forma earnings for the six months ended March 31, 2018 include the impact of remeasuring our initial 30% interest in Hulu to fair value, compensation expense of $184 million related to 21CF equity awards that were accelerated to vest upon closing of the acquisition, and $400 million of acquisition-related expenses.

The pro forma results exclude a $10.8 billion gain on sale and $237 million of equity earnings recorded by 21CF for the six months ended March 30, 2019 and 2018, respectively, related to its 39% interest in Sky plc which was sold by 21CF in October 2018. The pro forma results include $314 million and $321 million of net income recorded by 21CF for the six months ended March 30, 2019 and 2018, respectively, related to the 21CF businesses that we are required to divest as a condition of the acquisition (see the Assets to be Disposed and Discontinued Operations section below).

These pro forma results do not represent financial results that would have been realized had the acquisition actually occurred on October 1, 2017, nor are they intended to be a projection of future results.

Pursuant to a consent decree with the U.S. Department of Justice (DOJ), we are required to sell 21CF’s twenty-two Regional Sports Networks (the “RSNs”) (the “RSN Divestiture”) within 90 days of the closing of the 21CF acquisition, with the possibility that the DOJ can grant extensions of time up to another 90 days. The DOJ must approve the purchaser(s) and terms and conditions of the RSN Divestiture. On May 3, 2019, the Company entered into a definitive agreement with Sinclair Broadcast Group, Inc. to sell twenty-one of the RSNs (not including the YES Network), for a sales price of approximately $10 billion. Completion of the transaction is subject to customary closing conditions, including the approval of the DOJ.

Additionally, the Company has agreed with Conselho Administrativo de Defesa Economica (CADE) to sell 21CF’s sports operations in Brazil (the “Brazil Divestiture”) and agreed with the Instituto Federal de Telecomunicaciones (IFT) to sell 21CF’s sports operations in Mexico (the “Mexico Divestiture”). The Company will have 180 days from the date of the 21CF acquisition to complete the Brazil Divestiture. The Company will have six months, with the possibility that the IFT can grant extensions of time up to another six months, for the Mexico Divestiture. CADE and the IFT must approve the purchaser(s) and terms and conditions of the Brazil and Mexico Divestitures, respectively.

The European Commission approved the acquisition on the condition that the Company divest its interests in certain cable channels in the European Economic Area that are controlled by A+E, including History, H2, Crime & Investigation, Blaze and Lifetime (“the EEA Channels”). The Company divested its interests in the entities that operate the EEA Channels on April 12, 2019. The EEA Channels are not presented as assets held for sale or discontinued operations.

The RSNs and the Brazil and Mexico sports operations are presented as assets held for sale and discontinued operations in the Condensed Consolidated Balance Sheets and Statements of Income, respectively.

The preliminary fair values of the major classes of assets and liabilities of the RSNs and the Brazil and Mexico sports operations classified as held for sale on our Condensed Consolidated Balance Sheets are presented below and are subject to change based on developments during the sales process.



	March 30, 2019
Cash	$	100
Receivables and other current assets	855
Television costs and advances	511
Total current assets classified as held for sale	1,466
Film and television costs	1,730
Property and equipment and other assets	67
Intangible assets, net	7,569
Goodwill	3,816
Total assets classified as held for sale	$	14,648

Accounts payable and other accrued liabilities	$	371
Current portion of borrowings	33
Deferred revenue and other	30
Total current liabilities classified as held for sale	434
Borrowings	1,036
Other long-term liabilities	138
Redeemable noncontrolling interests	1,485
Total liabilities classified as held for sale	$	3,093



	Media Networks			Parks and Resorts			Studio Entertainment				Consumer Products & Interactive Media			Parks, Experiences and Products		Direct-to-Consumer & International			Unallocated		Total
Balance at Sept. 29, 2018	$	19,388		$	291			$	7,164		$	4,426		$	—		$	—	$	—	$	31,269
Segment recast ⁽¹⁾	(3,399		)	(291		)		(70		)	(4,426		)	4,487			3,699		—		—
Acquisitions ⁽²⁾	—			—				—			—			—			—		43,751		43,751
Other, net	—			—				14			—			—			23		—		37
Balance at Mar. 30, 2019	$	15,989		$	—			$	7,108		$	—		$	4,487		$	3,722	$	43,751	$	75,057