Disney Hulu+ Live TV and Fubo for pairing

Disney will combine its Hulu+ Live TV service with Fubocombining the two Internet TV packages, the companies announced Monday.

Disney will become the majority owner of the resulting company — publicly traded 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 a traditional cable TV package and offer linear TV networks. Together, the streaming services have 6.2 million subscribers.

Both services will continue to be available separately to consumers after the deal closes. Hulu+ live TV can be streamed through the Hulu app as well as from the Disney bundle, which also includes Hulu, Disney+ and ESPN+.

The deal does not include streamer Hulu, known for 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 Gundler said on a call with investors on Monday. He added that Hulu+ Live TV’s place in the Hulu ecosystem adds value through user retention.

“Having two separate platforms today is obviously not ideal,” Gundler said during the call. “We think there are synergies on the backend … But at this point, we really want to give consumers a choice.”

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

After the deal closes, Fubo is expected to be immediately cash flow positive, “immediately making Fubo a major player in the streaming space,” Gundler said on Monday’s call.

Fubo shares, which closed Friday at just $1.44 a share, surged 190% in early morning trading Monday.

Specifically, under the agreement, Fubo and Disney settled litigation regarding Venu, Disney’s proposed sports streaming service, Fox and Warner Bros. Discovery.

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

If the deal between Disney and Fubo is signed, Disney, Fox and Warner Bros. Discovery will jointly pay Fubo $220 million in cash. In 2026, Disney will make an additional $145 million term loan to Fubo. If the deal falls through, Fubo will receive $130 million to terminate the contract.

The combined company will be led by Fubo’s management team, including Gundler, and its new board of directors will have a majority from Disney.

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

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

However, Fubo has long focused its package on providing sports and news content. It is one of the last to offer many regional sports networks, channels that carry most of the games of professional local teams and often beckon high fees from distributors.

As a result, Fubo has fell out entertainment channels from its packages, including AMC Networks channels, as well as Warner Bros. TV. Discovery networks.

Fubo executives said Monday that the breadth of the newly combined company would give it more leverage in transportation discussions with other chains.

As part of the merger, the companies also announced Monday that Fubo and Disney have entered into a new carriage agreement that allows Fubo to create a new sports and broadcast service featuring Disney networks. On a call with investors, Fubo said it had also reached a new deal with Fox.

Fubo’s focus on sports was the main reason for the lawsuit against Disney, Warner Bros. Discovery and Fox’s sports broadcasting joint venture Venu.

Scheduled to launch before the NFL season in September, Venu was to be a complete offering of sports networks and content from the three media companies that came together to create it. The application would be cost $42.99 per month, showing the high value of sports games bundled with TVs and helping to avoid any violations of carriage agreements.

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 US sports rights for national broadcast.

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

After the settlement, Venu could move forward with the launch, although no plans were announced 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 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.