Why fuboTV stock has tripled today

Shares of fuboTV (FUBO 251.39%)the struggling sports streaming service, soared today after the company agreed to merge fuboTV with Hulu + Live TV, owned by Walt Disney (HAZE -0.03%)under the fuboTV name and ticker.

FuboTV will own 30% of the new company, while Disney will own 70%.

The investor response is not surprising as fuboTV had struggled to turn a profit and a merger appears to be the best outcome for investors.

From As of 12:16 PM ET, fuboTV stock was up an incredible 239%. Disney, meanwhile, rose 1.4%, showing investors approve of the deal from both sides.

Image source: Getty Images.

What the Hulu deal means for fuboTV

In addition to a 30% stake in the new business, fuboTV will receive a cash settlement payment of $220 million from Disney, Foxand Warner Bros. Discovery related to fuboTV’s lawsuit against the proposed Venu Sports joint venture between Disney, Fox and Warner Bros. to be its own streaming sports service.

Disney will also make a $145 million loan to fuboTV next year as part of the transaction, and fuboTV will get a $130 million termination fee if the deal is blocked by regulators. FuboTV’s current management will continue to lead the new company, although the board will be governed by a majority appointed by Disney.

What’s next for fuboTV?

The deal dramatically transforms fuboTV and enhances the service as it will be much more than sports, now including Hulu programming and the traditional cable channels that are part of Live TV.

The combined entities currently have 6.2 million North American subscribers and $6 billion in annual revenue, and the new business is expected to be cash positive at inception.

More consolidation is likely ahead in the video streaming industry as legacy media companies have struggled to transition to streaming. The combination could also help lead to a deal between ESPN and fuboTV when ESPN launches its flagship streaming service later this year, as Disney is likely to make the new ESPN streaming service as compelling as it can be.

The deal is expected to close in 12 to 18 months, pending approval by the authorities.