Disney Hulu+ Live TV and Fubo to combine

Disney will combine its Hulu+ Live TV service with Fubothat are merging two Internet TV packages, the companies announced on Monday.

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

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

Both services will still be available separately to consumers after the agreement expires. Hulu+ Live TV can be streamed through the Hulu app, as well as part of Disney’s 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 with respect to Hulu,” Fubo co-founder and CEO David Gandler said on a Monday call with investors. He added that Hulu+ Live TV’s place embedded in the Hulu ecosystem adds value in terms of user retention.

“Having two separate platforms today, of course, it’s not ideal,” Gandler said on the call. “We believe there are synergies in the backend … But right now, we really want to give consumers choices.”

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

Fubo is expected to be immediately cash positive after the deal closes, “instantly making Fubo the largest player in the streaming space,” Gandler said on Monday’s call.

Fubo stock, which closed Friday at just $1.44 a share. stock, rose 190% in morning trading Monday.

In particular, pursuant to the agreement, Fubo and Disney have settled lawsuits relating to Venu, the proposed sports streaming service from Disney, Fox and Warner Bros. Discovery.

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

Once the Disney-Fubo deal is signed, Disney, Fox and Warner Bros. Discovery together make a cash payment of 220 million dollars to Fubo. Disney will also commit a $145 million loan to Fubo in 2026. If the deal goes 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 will be majority appointed by Disney.

Bloomberg reported earlier 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’s YouTube TV.

As a result, Fubo has the fall entertainment-focused channels from their bundles, including AMC Networks’ channels as well as Warner Bros. Discovery’s television network.

Fubo executives said Monday that the breadth of the newly combined company will give it more leverage in carriage discussions with other networks.

As part of the merger, the companies also announced Monday that Fubo and Disney entered into a new carriage agreement that will allow Fubo to create a fresh sports and television service that includes Disney’s network. During the investor call, Fubo said it also reached a new deal with Fox.

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

Scheduled to launch in time for the start of the NFL season in September, Venu was supposed to be a complete offering of sports networks and content from the three media companies that had teamed up to create it. The app would have cost $42.99 a month, reflecting the high cost of sports in the TV package and helping to avoid disruption to carrier deals.

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

Fubo had claimed in its lawsuit that Venu was anti-competitive and would hamper its business. When the 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 the launch, although no plans were announced Monday.

Disney, meanwhile, has more 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, co-owns Hulu.