FOXA+ROKU: Going for Growth

Research evidence excerpt

FOXA+ROKU: Going for Growth

FoundationM(FY27-30e). The NewCo's revenue exposure to linear should decline from ~65%

today to ~50% by 2030 (see Exhibit 1 ). While we forecast the deal to be FCF/sh

dilutive in the short-term (~12% in FY28), we get to +3% FCF/sh accretion in FY29

and ~12% in FY30 to $9-10/sh. Given healthy FCF conversion (+70%), we estimate

NewCo quickly de-levers from ~2-3x at close to ~2x by FY28 and ~1x by FY29e.

Implications for FOX: We view this transaction as an acceleration of FOX's strategy

to increase exposure to streaming and CTV. The acquisition of Roku would expand

FOX's position from content owner and distributor into platform ownership,

providing direct access to >100 million streaming households mostly in the US (but

an emerging International growth opty). We believe the combination has the

potential to boost FOX's content reach through Roku's distribution and provide

value through Roku's first-party data. While some peers are making a bet on owning

content assets, Fox is making a clear bet on the future of distribution.

Implications for ROKU: Founder/CEO Anthony Wood highlighted the continued

participation in the upside of the combined company through the stock portion of

the deal consideration. FOX emphasized the strategic importance of Roku remaining

an open, partner-friendly ecosystem moving forward. In addition, Anthony Wood is

expected to remain involved in the combined company following closing and join the

FOX Board of Directors. We note that while Wood holds >50% voting power in

Roku through Class B shares, FOX will pay equal consideration for both Class A and

Class B ROKU shares.

Financing Considerations: FOX expects to fund the cash portion of the transaction

through a combination of cash on hand and new debt financing.