FOX FAMILY JOINS DISNEY MICKEY'S REACH GETS BROADER.

Byline: Gregory J. Wilcox Staff Writer

Mickey Mouse's family grew Monday to include Spiderman, Digimon, Inspector Gadget and the Power Rangers as The Walt Disney Co. confirmed it is buying Fox Family Worldwide Inc. for $5.3 billion.

Disney's outlay of $3 billion cash and assumption of $2.3 billion in debt creates an entertainment powerhouse called ABC Family that will reach 95 percent of domestic households receiving cable or satellite service.

``It is nearly impossible at this stage of the game to build or buy a network with this extensive reach,'' Michael Eisner, Disney's chairman and chief executive officer, said in announcing the deal Monday morning in Pasadena.

``I can't think of a better home for the channel than The Walt Disney Company,'' said Maureen Smith, president of Fox Family Channel. ``Disney has long been a front-runner in programming for family and kids, and we are very excited for the opportunity to take the channel to a new level in family entertainment.''

It also enables Disney to add another major cable outlet to a powerful corporate roster that already included ABC, ESPN, the Disney Channel and Toon Disney among others.

The deal gives Burbank-based Disney:

--The Fox Family Channel, currently beamed to approximately 81 million cable and satellite television subscribers throughout the United States. It will be renamed ABC Family.

--A 76 percent stake in Fox Kids Europe, a base of more than 24 million subscribers.

--Ownership of Fox Kids channels in Latin America, which are currently seen by approximately 10 million subscribers.

--The Saban Library and Entertainment Productions business, a collection of more than 6,500 episodes of animated and live-action children's and family-friendly programming.

Disney will eventually put its brand on the kids' channels.

``This is where the Disney company should be - its core values are Disney brand entertainment,'' Eisner said. ``We are content obsessive, and the Family Channel acquisition goes to our sweet spot.''

Fox Family was jointly owned by News Corp. and Saban Entertainment Inc., a programmer of children's shows and creator of the popular Mighty Morphin Power Rangers. The deal was made possible after Saban exercised a right to have News Corp. buy out its stake.

Also part of the package are rights to Major League Baseball games two nights a week during the regular season and between eight and 11 first- round playoff games.

Robert Iger, Disney's president and chief operating officer, said News Corp. and Saban insisted baseball be included and that the games will be produced by ESPN.

The ABC Family Channel will also continue broadcasting the 700 Club and other shows made by Pat Robertson's Christian Broadcast Network, which became the Family Channel and eventually was rebranded Fox Family Channel in August 1998.

Analysts gave the deal high marks.

But it will not be accomplished without some pain. Disney expects the combined operations to result in savings of $50 million or more annually, in part because duplicate services will be eliminated.

Fox Family Channel has about 850 domestic employees. Disney officials said it is too soon to say how many jobs might be eliminated.

``This is a great fit with their content and distribution franchises. I think its a smart strategic move,'' said Jeffrey B. Logsdon, an entertainment analyst at Gerard Klauer Mattison & Co. in Los Angeles. ``If they are able to achieve the cost savings and ratings enhancement over the next couple of years, this is going to be looked back on as a very valuable acquisition.''

Christopher Dixon, an analyst at UBS Warburg in New York, said that Disney is paying about $43.50 a subscriber, a fair price.

``We believe this deal rounds out the company's cable operations domestically and gives the company a strong international foothold from which it can build further operations,'' Dixon said in an analysis of the transaction.

News of the deal surfaced Friday but negotiations actually started several weeks ago in Sun Valley, Idaho, at an annual conference hosted by the investment banking firm Herb Allen and Co.

Representing Disney were Eisner, Iger, Peter Murphy, chief strategic officer, and Tom Staggs, chief financial officer.

Fox and Saban were represented by Rupert Murdoch, chairman and CEO of News Corp.; Peter Chernin, the company's president and chief operating officer and Haim Saban, owner of Saban entertainment.

This is the first large acquisition by Disney since it bought Capital Cities/ABC in 1996. That deal, too, was first broached at the Allen conference in Sun Valley.

Disney's purchase of Fox Family Worldwide is seen as positive for News Corp., too, which gets cash the company can use to buy the DirecTV satellite broadcaster.

``It looks terrific for (Disney) and it's a terrific exit for Fox,'' said Edward T. Hatch, an analyst at SG Cowen Securities in New York.

Disney estimates the deal will increase advertising revenue at the new ABC Family by 50 percent within two years from the 2001 level of approximately $200 million generated under the Fox name plate.

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Photo:

(color) Robert Iger, left, president of Fox Family Worldwide Inc. and Michael Eisner, chief executive officer of The Walt Disney Company, take questions Monday about the acquisition by Disney of the children's cable network.

Patrick Liotta/Associated Press

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CABLE GIANT EXPANDS

SOURCE: The Walt Disney Company

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