Fox and Roku shareholders approve Fox’s $22 billion Roku acquisition as DOJ review continues

Shareholders of Fox Corp. and Roku approved Fox’s $22 billion acquisition of the streaming platform at separate special meetings on Wednesday, Oct. 14, Variety reported. Fox’s vote filing shows its voting shareholders approved issuing the new Fox stock the deal requires. The deal now waits on the Justice Department, and both companies still expect to close in the first half of 2027.

Under the June 14 merger agreement, each Roku share converts into $96 in cash plus 0.9693 of a Fox Class A share, a package the companies valued at $160 a share and about $22 billion in enterprise value, according to the deal announcement. The stock portion was pegged to Fox’s average price in early June, so its value moves with Fox shares until closing.

What Fox is buying

Roku’s software runs the TVs in more than 100 million streaming households worldwide, and it earns most of its money from what happens on that screen: ads, a cut of subscriptions sold through it, and The Roku Channel, its own free ad-supported streaming service. That category, known in the industry as FAST, for free ad-supported streaming TV, works like broadcast TV delivered over the internet, with commercials paying the bills instead of a monthly fee.

Fox already owns one of the biggest FAST services, Tubi, which had more than 100 million monthly active users in Fox’s latest fiscal year, according to the joint proxy statement/prospectus. Tubi averaged about 2.2% of all U.S. TV viewing over that year on Nielsen’s measure, the proxy says. The Roku Channel was the second-most-watched app on Roku’s own U.S. platform in the second quarter, Roku said in its shareholder letter.

Roku’s platform revenue, which covers ads and subscriptions, rose 25% from a year earlier to $1.22 billion in the second quarter. Added up over the last four reported quarters, it comes to about $4.64 billion. Roku posted record quarterly net income of $164 million and $704 million of free cash flow over the trailing twelve months, meaning the cash left after running the business and paying for equipment.

The price, per dollar and per screen

At $22 billion, Fox is paying a little under five times Roku’s trailing platform revenue, by my math. Spread across “more than 100 million” streaming households, it works out to no more than about $220 per home.

Fox’s $160 proposal implied a premium of roughly 25% over Roku’s closing price on May 26, according to the proxy’s account of the negotiations. Roku countered at $172 a share on May 26, a day after Fox’s bankers signaled it had ‘little or no more room’ to go higher.

How Fox pays for it

The cash side is the heavy part. The proxy estimates $14.7 billion in cash going to Roku shareholders. At the end of June, Fox carried about $6.6 billion of debt and Roku carried none.

Fox lined up $12 billion of bridge loans, short-term borrowing meant to be replaced by longer-term bonds, from Morgan Stanley Senior Funding. A separate $1 billion term loan signed June 30 cut the bridge commitment to $11 billion. The deal isn’t conditioned on Fox getting financing. Fox has said it expects to fund the cash with new debt and cash on hand, and it is paying Morgan Stanley a $30 million advisory fee, $25 million of it only if the deal closes, according to an October filing.

Fox’s case rests on about $400 million a year in cost savings once the companies are combined, plus revenue gains it hasn’t put a number on.

What’s left before closing

Fox and Roku filed their antitrust notices on July 6. On Sept. 8, each got a second request from the Justice Department, a demand for more documents that extends the waiting period until 30 days after both companies have substantially complied, Fox disclosed in a September filing. The companies have also filed with regulators in the United Kingdom and Germany.

Fox owns Tubi, and Roku decides which apps get placed where on its home screen, including rival FAST services. Fox and Roku said in June they are “committed to continuing to operate Roku as an open, partner-friendly platform.”

What the contract says about the risk

The merger agreement puts a price on each way the deal could fail. If Roku walks away for a better offer, it pays Fox $866 million. If antitrust law blocks the deal, or the deadline passes with only regulatory approvals missing, Fox pays Roku a reverse termination fee of about $1.24 billion in cash.

Variety called the vote expected, and the contract prices the Justice Department review higher: Fox’s regulatory breakup fee is larger than Roku’s $704 million of trailing free cash flow and Fox’s $400 million of promised annual savings combined, about $1.1 billion, by my math.

During negotiations, Roku asked for a deal that wouldn’t require Fox to sell any assets but could involve behavioral remedies, meaning promises about how the business will be run. That leaves open what the Justice Department might ask for, and how much of the platform’s neutrality Fox ends up writing into a settlement.

Roku founder Anthony Wood will stay with the combined company and join Fox’s board after closing, according to the deal announcement.

The first concrete marker is the date Fox and Roku tell the Justice Department they have substantially complied with its document request, which starts the final 30-day clock.