Disney Hulu+ Live TV and Fubo to combine

Disney will combine its Hulu+ Live TV service with Fubujoining two Internet TV bundles, the companies announced on Monday.

Disney will become the majority owner of the resulting company – the publicly traded company Fubo – with a 70% stake. Fubo shareholders will own the remaining 30% of the company. The deal is expected to close in 12 to 18 months.

Both Hulu+ Live TV and Fubo are streaming services that mimic the traditional cable TV bundle, offering linear TV networks. Together, the streaming services have 6.2 million subscribers.

Both services will still be available separately to consumers after the deal closes. Hulu+ Live TV can be streamed through the Hulu app, as well as part of the Disney bundle that also includes Hulu, Disney+ and ESPN+.

The deal does not include streamer Hulu, known for creating original content such as “Only Murders in the Building” and “The Handmaid’s Tale,” which competes with platforms such as Netflix.

“We are now stewards of an iconic brand in terms of Hulu,” Fubo co-founder and CEO David Gandler said during a Monday call with investors. He added that Hulu+ Live TV’s place embedded in the Hulu ecosystem adds value for user retention.

“Having two separate platforms today is obviously not ideal,” Gandler said during the call. “We believe there are synergies on the backend … But at the moment we really want to provide consumers with choice.”

Gandler noted that while Fubo has long focused on sports and news offerings, Hulu+ Live TV is also known for its entertainment offerings.

Fubo is expected to become cash flow positive immediately after the deal closes, “instantly making Fubo the leading player in the streaming space,” Gandler said Monday.

Fubo’s stock, which closed Friday at just $1.44 per share, rose as much as 170% early Monday before paring some gains.

Specifically, under the agreement, Fubo and Disney have settled litigation related to Venu, the sports streaming service offered by Disney, Fox and Warner Bros. Discovery.

Fubo had brought a lawsuit against Disney, Fox and WBD alleging that the service would be anti-competitive, and last year a US judge temporarily. blocked the launch of Venu.

When the Disney-Fubo deal is signed, Disney, Fox and Warner Bros. Discovery will jointly make a $220 million payment to Fubo. Additionally, Disney will commit a $145 million loan to Fubo in 2026. If the deal were to fall through, Fubo would receive a $130 million termination fee.

The combined company will be led by Fubo’s management team, including Gandler, while its new board of directors will be appointed in a majority by Disney.

Bloomberg reported Earlier on Monday, a deal to merge the live TV streaming services was imminent.

Fubo had 1.6 million subscribers in North America before the combination with Hulu+ Live TV and competes with other similar bundle platforms such as Google YouTube TV.

However, Fubo has long focused its beam on providing sports and news content. It is one of the last to offer a variety of regional sports networks, the channels that host most of the matches of professional local teams and often to call high fees from distributors.

As a result, Fubo has fell down entertainment-focused channels from its bundles including AMC Networks channels, as well as Warner Bros. TV. net.

Fubo executives said Monday that the breadth of the new combined company will give it more leverage in transportation talks with other networks.

As part of the merger, the companies also announced Monday that Fubo and Disney have signed a new carriage agreement that allows Fubo to create a new sports and broadcast service featuring Disney’s networks. During the investor call, Fubo said it also reached a new deal with Fox.

Fubo’s focus on sports was a primary driver behind his lawsuit against Disney, Warner Bros. Discovery and Fox’s sports streaming service, Venu.

Venu, which had been slated to launch in time for the start of the NFL season in September, was supposed to be a comprehensive offering of sports networks and content from the three media companies that had come together to create it. The app would have cost $42.99 per month, which shows the high cost of sports in the TV bundle and helps to avoid any disruption of transport agreements.

The judge in the case noted that together Disney, Fox and WBD control about 54% of all US sports media rights, and at least 60% of all nationally broadcast US sports rights.

Fubo had alleged in its lawsuit that Venu was anti-competitive and would disrupt its business. When a US judge temporarily blocked the launch of Venu in August, it was a big win for Fubo. The trio of media companies appealed the court’s decision.

With the settlement, Venu can move forward with its launch, although it was not announced on Monday.

Disney, meanwhile, has several irons in the fire when it comes to ESPN streaming options. In addition to its current app, ESPN +, and Venu, ESPN plans to launch a flagship direct-to-consumer streaming app later this year.

— CNBC’s Alex Sherman contributed to this article.

Disclosure: Comcast, which owns CNBC parent NBCUniversal, is a co-owner of Hulu.