Fox agrees to buy streaming pioneer Roku for $22B US

Fox has agreed to buy the streaming pioneer Roku in a cash and stock deal valued at approximately $22 billion US, including debt.

The deal will give Fox access to more than 100 million global households, along with the Roku channel and its first-party data. Fox oversees a massive sports, news and entertainment network, as well as Tubi, which it acquired in 2020.

Roku founder Anthony Wood had initially worked within Netflix in the early 2000s as that company attempted to make the seismic shift from renting DVDs to video streaming. The firm was spun off by Netflix, however, and it released its first set-top box in 2008.

Wood, who is Roku's chairman and CEO, said his motivation in pursuing the 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 television 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 the free-to-watch Roku Channel.

Advertising is its largest ‌component, with revenue of $613 million in the first quarter, up 27 per cent year-on-year.

The companies said Monday that Roku will continue to be run as an open, partner-friendly platform. Fox and Roku said that the combined company will become the third-largest player in U.S. television by share of viewing.

Fox CEO Lachlan Murdoch said in a statement that combining the businesses will bring together Fox's live news and sports content with a streaming platform with large viewership. It will also give Fox more exposure to advertising and streaming subscriptions.

"The combination with Fox is an extraordinary opportunity to accelerate our vision, scale faster and innovate more aggressively for viewers, partners and advertisers," Wood said in prepared remarks.

Wood will have an ongoing role at the company and will join the Fox board of directors after the transaction closes.

Analyst Paolo Pescatore with PP Foresight says buying Roku gives Fox more heft in the ad-supported streaming space.

"This gives Fox greater control ⁠over discovery, ⁠data and monetization at a time when TV ​viewing continues to shift away from traditional channels," Pescatore said.

"Bringing together premium content, live sports, advertising and ​platform distribution under one roof creates ⁠a compelling proposition."

Under the deal, Roku investors will receive $96 US in cash and about 0.97 Fox Class A shares for each share held, valuing the offer at $160 US per share.

Existing Fox shareholders are expected to own approximately 73 per cent of the combined company and Roku shareholders will own about 27 per cent, once the deal closes.

The deal is expected to close in the first half of next year. It still needs approval from Fox and Roku shareholders and also regulatory approval.

Fox's stock declined before the market open, while shares of Roku rose slightly.