Acquisitions

12 Months Ended

Oct. 02, 2021

TFCF Corporation

On March 20, 2019, the Company acquired the outstanding capital stock of TFCF for $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). Prior to the acquisition, TFCF and a newly-formed subsidiary of TFCF (New Fox) entered into a separation agreement,

pursuant to which TFCF transferred to New Fox a portfolio of TFCF’s news, sports and broadcast businesses and certain other assets. TFCF retained all of the assets and liabilities not transferred to New Fox, the most significant of which were the Twentieth Century Fox film and television studios, certain cable networks (primarily FX and National Geographic), TFCF’s international television businesses (including Star) and TFCF’s 30% interest in Hulu. Under the terms of the agreement governing the acquisition, the Company will generally phase-out Fox brands by 2024, but has perpetual rights to certain Fox brands, including Twentieth Century Fox and Fox Searchlight, although these have been rebranded to Twentieth Century Studios and Searchlight Pictures, respectively.

We acquired TFCF 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.

The purchase price for TFCF includes $361 million related to TFCF stock awards that were settled or replaced in connection with the acquisition, and in fiscal 2019, the Company recognized compensation expense of $164 million related to stock awards that were accelerated to vest upon closing of the acquisition. Additionally, compensation expense of $219 million related to stock awards that were replaced with new restricted stock units is being recognized over the post-acquisition service period of up to approximately two years.

In fiscal 2019, the Company incurred $0.3 billion of acquisition-related expenses, of which $0.2 billion is included in “Selling, general, administrative and other”, and $0.1 billion related to financing fees is included in “Interest expense, net” in the Consolidated Statements of Operations.

In fiscal 2019, the Company remeasured its initial 30% interest in Hulu to its estimated fair value and recorded a one-time gain of $4.8 billion (Hulu Gain), which was determined based on a discounted cash flow analysis. On April 15, 2019, Hulu redeemed Warner Media LLC’s (WM) 10% interest in Hulu for $1.4 billion. The redemption was funded by the Company and NBCU. This resulted in the Company’s and NBCU’s interests in Hulu increasing to 67% and 33%, respectively. NBCU’s interest is classified as a redeemable noncontrolling interest in the Consolidated Balance Sheets. See Note 2 for further discussion of NBCU’s interest.

In order to obtain regulatory approval for the acquisition, the Company agreed to sell TFCF’s domestic regional sports networks (RSNs) (sold in August 2019 for approximately $11 billion) and sports media operations in Brazil and Mexico. In addition, the Company agreed to divest its interest in certain European cable channels that were controlled by A+E Television Networks (A+E) (sold in April 2019 for an amount that was not material). In the third quarter of fiscal 2020, the Company received regulatory approval to retain the sports media operation in Brazil. In May 2021, the Company entered into an agreement to sell the Fox sports media business in Mexico for an amount that is not material. The transaction received regulatory approval and closed in November 2021. The RSNs and sports media operation in Mexico, along with certain other divested businesses, are presented as discontinued operations in the Consolidated Statements of Operations. At October 2, 2021 and October 3, 2020, the assets and liabilities of the businesses held for sale are not material and are included in other assets and other liabilities in the Consolidated Balance Sheets.

The following pro forma summary presents consolidated information of the Company for fiscal 2019 as if the acquisition of TFCF and consolidation of Hulu had occurred on October 1, 2017:


Revenues	$	78,047
Net income	7,511
Net income attributable to Disney	7,206
Earnings per share attributable to Disney:
Diluted	$	3.68
Basic	3.70

The pro forma results include adjustments for purposes of consolidating the historical financial results of TFCF and Hulu (net of adjustments to eliminate transactions between Disney and TFCF, Disney and Hulu, and Hulu and TFCF). The pro forma results include $3.1 billion (of which $0.4 billion related to the RSNs) to reflect the incremental amortization as a result of recording film and television programming and production costs and finite lived intangible assets at fair value. Interest expense of $0.4 billion is included to reflect the cost of borrowings to finance the TFCF acquisition. The pro forma results also include $0.9 billion of net income attributable to Disney related to TFCF businesses that have been divested.

The pro forma results exclude the Hulu Gain, compensation expense of $0.2 billion related to TFCF equity and cash awards that were accelerated to vest upon closing of the acquisition, and $0.4 billion of acquisition-related expenses. These amounts were recognized by Disney and TFCF in fiscal 2019.

The pro forma results exclude a $10.8 billion gain on the sale of TFCF’s 39% interest in Sky plc in October 2018.

The 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.

Goodwill

The changes in the carrying amount of goodwill are as follows:


	Media Networks		DPEP		Studio Entertainment		Direct-to-Consumer & International		DMED		Total
Balance at Sept. 28, 2019	$	33,423	$	5,535	$	17,797	$	23,538	$	—	$	80,293
Acquisitions(1)	568		15		98		51		—		732

Impairments (see Note 19)	—		—		—		(3,074)		—		(3,074)
Currency translation adjustments and other, net	—		—		(100)		(162)		—		(262)
Balance at Oct. 3, 2020	$	33,991	$	5,550	$	17,795	$	20,353	$	—	$	77,689


Segment recast(2)	(33,991)		—		(17,795)		(20,353)		72,139		—
Currency translation adjustments and other, net	—		—		—		—		382		382
Balance at Oct. 2, 2021	$	—	$	5,550	$	—	$	—	$	72,521	$	78,071

(1)Reflects updates to allocation of purchase price for the acquisition of TFCF.

(2)Reflects the reallocation of goodwill as a result of the Company recasting its segments.