Deal would create world's biggest media conglomerate
By GARY GENTILE
Associated Press
ORLANDO, Fla.
Cable television giant Comcast Corp. made a surprise bid Wednesday to buy The Walt Disney Co. for more than $54 billion, a deal that would take advantage of Disney's growing vulnerability and create the world's biggest media conglomerate.
Disney's board released a statement saying it would "carefully evaluate" Comcast's unsolicited offer.
If approved, the deal would drastically alter the nation's media landscape by bringing together two companies that have enormous interests in the film, television and cable TV industries.
Comcast is the nation's largest cable company with 21 million subscribers, and has a stake in several cable networks, while Disney owns the ABC and ESPN television networks, in addition to movie studios and theme parks.
Comcast CEO Brian Roberts said the combination "would create one of the world's premier entertainment and communications companies, and, we believe, restore the Disney brand to prominence and the company to growth."
A Disney-Comcast combination would eclipse Time Warner as the world's biggest media company.
The immediate hurdle will likely be a financial one, as Disney shareholders ponder whether the deal is rich enough, said Ellen Goodman, an associate professor at the Rutgers University School of Law at Camden and an authority on media law.
"Is the offer high enough?" she asked. "There's no reason to believe the shareholders will go for it."
Goodman doesn't expect anti-trust issues to derail the bid because Comcast and Disney serve different markets. "Comcast has some content, but not a lot - sports and a few news shows," she said. "Getting that Disney content would mean a lot."
The offer comes at a vulnerable time for Disney. The boardroom has been in turmoil over Disney chief Michael Eisner's leadership and the collapse of talks to extend the company's lucrative deal with Pixar Animation Studios, which created such blockbuster hits as Toy Story and Finding Nemo. Disney is also suffering from lagging performances at key businesses such as ABC.
The deal could mean the end of the 20-year career of Eisner, who is fending off criticism from former board members Roy E. Disney, the nephew of Disney founder Walt Disney, and Stanley E. Gold about his performance and lack of a succession plan.
Comcast said Eisner declined earlier this week to discuss a possible merger.
The bid was initially valued at $54 billion, but investors bid up the price of Disney stock beyond the Comcast offer - a signal that Comcast would have to sweeten its offer to be successful.
Comcast made the announcement just as Disney was to start two days of meetings with analysts at its flagship Walt Disney World theme park and hours before Disney was to announce strong first-quarter earnings.
As if to answer the bid, Disney released its first-quarter earnings hours sooner than planned.
The earnings easily beat analysts' expectations and showed the company was firmly on a turnaround that would see 30 percent earnings growth this year and double-digit growth until at least 2007, Eisner said.
Eisner made a brief reference to the bid at the beginning of a conference call to discuss the earnings, saying the board had asked Disney's management and advisers "to provide an in-depth analysis of the proposal to enable the board to respond appropriately."
Analysts said the Disney-Comcast combination made sense, but questioned whether Comcast would be able to sufficiently sweeten the pot.
They also were not surprised that Comcast, which has access to cable subscribers, would be interested in Disney, with its visible brand and roster of top-rated cable channels.
But they were taken off guard by the timing. Disney's stock, which has lagged over the past six years or so, has risen sharply over the past year and earnings have also climbed on the strength of Disney's film slate and a turnaround at its theme parks.
"It's going for the jugular," said Paul Kim, senior media analyst at Tradition Asiel Securities. "He (Roberts) is using this vulnerable time to force Disney's hand."
Kim also said Comcast is basically a cable company, and might be biting off more than it can chew. "I think they underestimate the complexity of being a broad-based media company," he said.
In a conference call Wednesday, Comcast's Steve Burke, the head of the company's cable division and a former Disney executive, sounded many of the same notes as Gold and Roy Disney.
"We think restoring Disney animation to its rightful place is important," Burke said, echoing a major criticism levied by Roy Disney. "Our goal would be to again place Disney animation in the center of the company."
In a news conference in New York, Roberts said he hoped to make the deal "as friendly and amicable as possible, as fast as possible," but he also noted that he was ready to abandon the proposed merger if need be. "We've walked away from big things before. Life goes on," Roberts said.
Comcast also released a letter sent to Eisner indicating that Eisner had personally rejected Roberts' offer to begin merger talks earlier in the week.
The letter called it "unfortunate" that Eisner was not willing to enter into discussions. "Given this, the only way for us to proceed is to make a public proposal directly to you and your board," the letter said.
Comcast's bid values each Disney share at $26.49, a 10 percent premium over Tuesday's closing price. Disney shares shot up $3.44, or 14 percent, to $27.35 in heavy trading on the New York Stock Exchange. Comcast tumbled $2.69, or 8 percent, to $31.24.