Fox Corp. has agreed to acquire Roku Inc. in a deal valued at approximately US$22 billion, including debt, marking a significant push into ad-supported streaming and creating a new television powerhouse.
Deal Terms and Market Reaction
Under the terms, Fox will pay US$96 in cash and 0.9693 Fox Class A shares for each Roku share. Roku shares surged 20% on Friday following reports of the talks, but slipped about 1.9% to US$140.95 in Monday trading. Fox shares tumbled 18%, reducing the stock component's value. The implied price per Roku share from the offer stood at roughly US$143, about 2% above Roku's trading price.
Strategic Rationale
The acquisition blends Fox's sports, news, and entertainment channels—including the free ad-supported Tubi—with Roku's streaming platform of over 100 million subscribers. The companies stated the merger will create the third-largest player in the U.S. television market by share of viewing, spanning broadcast, cable, local, and streaming.
Fox CEO Lachlan Murdoch said, "This combination will transform the scope of our company into high-growth verticals and yield a step change in our overall growth profile." The deal bolsters Fox's streaming business as consumers shift to cheaper ad-supported plans. Fox acquired Tubi in 2020, which now has nearly 100 million monthly active users and revenue growth of 23% in the fiscal third quarter.
Competitive Landscape
Combining Tubi with Roku creates a free, ad-supported streaming powerhouse to compete with Amazon.com Inc. and Netflix Inc. for advertising dollars. Fox plans to keep Tubi and the Roku Channel as separate offerings, viewing them as complementary services.
Roku's Role and Business Model
Roku's streaming devices revolutionized digital home entertainment by enabling streaming from apps like Netflix and HBO Max on any TV. The company also sells branded TVs and projectors, but most revenue comes from digital advertising and distributing streaming services. The platform segment generated US$4.1 billion, or 87.5% of revenue last year. Roku keeps hardware prices low to attract users, monetizing their viewing habits through advertising.
