• Disney will combine its Hulu+ Live TV service with Fubo, merging together two internet TV bundles.
• Both Hulu+ Live TV and Fubo are streaming services that mimic the traditional cable TV bundle, offering linear TV networks.
• The deal doesn't include the streamer Hulu, known for creating original content like "Only Murders in the Building" and "The Handmaid's Tale."
• Fubo stock surged in early trading.

Disney will combine its Hulu+ Live TV service with Fubo, merging together two internet TV bundles, the companies announced Monday.

Disney will become majority owner of the resulting company — the publicly traded Fubo company — with a 70% ownership 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 Disney's bundle that also includes Hulu, Disney+ and ESPN+.

The deal doesn't include the streamer Hulu, known for creating original content like "Only Murders in the Building" and "The Handmaid's Tale," which competes with platforms like Netflix.

"We are now stewards of an iconic brand with respect to Hulu," said Fubo co-founder and CEO David Gandler during a Monday call with investors. He added that Hulu+ Live TV's place embedded inside the Hulu ecosystem adds value by way of user retention.

"Having two separate platforms today, obviously, it's 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 been focused on offering sports and news, Hulu+ Live TV is known for its entertainment offerings, too.

Fubo is expected to become immediately cash flow positive following the deal close, "instantly making Fubo the major player in the streaming space," Gandler said on Monday's call.

Fubo stock, which closed Friday at just $1.44 per share, surged 250% Monday.

Notably under the deal, Fubo and Disney have settled litigation regarding Venu, the proposed sports streaming service from Disney, Fox and Warner Bros. Discovery.

Fubo had brought a lawsuit against Disney, Fox and WBD alleging the service would be anticompetitive, and last year a U.S. judge temporarily blocked the launch of Venu.

When the Disney-Fubo deal is signed, Disney, Fox and Warner Bros. Discovery will together make a $220 million cash payment to Fubo. Disney will additionally commit a $145 million term 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 majority appointed by Disney.

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

Sports focus

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

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

As a result, Fubo has dropped entertainment-focused channels from its bundles including AMC Networks' channels, as well as Warner Bros. Discovery's TV networks.

Fubo executives said Monday 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 which allows for Fubo to create a fresh sports and broadcasting service that features Disney's networks. During the investor call, Fubo said it also reached a new agreement 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.

Venu, which had been slated to launch in time for the beginning of the NFL season in September, was to be a complete 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 a month, showcasing the high cost of sports in the TV bundle and helping to avoid any disturbance of carriage agreements.

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

Fubo had alleged in its lawsuit that Venu was anticompetitive and would upend 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 ruling.

With the settlement, Venu can move forward with its launch, although no plans were announced Monday.

Disney, meanwhile, has multiple 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.