WASHINGTON, 12 February 2004 — US cable operator Comcast offered yesterday to buy Walt Disney Co., valuing the media giant at about $66 billion, but Disney chief Michael Eisner has opposed the bid.
“This is a unique opportunity for all shareholders of Comcast and Disney to create a new leader of the entertainment and communications industry,” Comcast’s president and chief executive, Brian Roberts, said in a statement.
“Not only would this merger create significant shareholder value, but it would also position the combined company to compete vigorously with other entertainment and communications companies, including newly created integrated distribution content providers.”
Roberts presented the offer, which could well be viewed as a hostile bid, in a letter to Disney Chief Executive Eisner yesterday.
In the letter, Roberts said: “I am writing following our conversation earlier this week, in which I proposed that we enter into discussions to merge Disney and Comcast to create a premier entertainment and communications company. It is unfortunate that you are not willing to do so. “Given this, the only way for us to proceed is to make a public proposal directly to you and your board.”
Roberts proposed “a tax-free stock for stock merger” in which Comcast would issue 0.78 of a share for each Disney share. The offer, including assumption of some $12 billion of Disney debt, would be a 10 percent premium based on closing share prices of both firms Tuesday. “This represents a premium of over five billion dollars for your shareholders,” Roberts said, noting that under the plan, Disney shareholders would control about 42 percent of the combined firm. There was no immediate reaction to yesterday’s announcement from Disney. But Wall Street reacted positively to the bid, saying it could spur further mergers and acquisitions activity in the media and entertainment sector.
“It’s nice to see (merger and acquisition) activity back in the markets. It shows companies have cash,” said Brian Williamson, vice president of equity trading at Boston Company Asset Management. “It also fuels speculation on whether or not there are other companies in the sector which are possible takeover targets.”
Peter Cardillo, chief market analyst at SW Bach, said it was “debatable” whether the Comcast bid would succeed but the bid shows that “confidence is building in corporate America. The acquisition trail is heating up.” The bid comes as the Disney empire is being roiled by a feud involving the company founder’s nephew, Roy Disney, and Eiser’s management team.
Roy Disney and his supporters want Eisner to step down at the next shareholder meeting in March, claiming the top executive has eroded a rich legacy left by the creators of Mickey Mouse and Donald Duck.
Roy Disney and his backers created a website, which urges visitors to “save Disney” while saying no to Eisner. They have complained about the gap between Eisner’s pay, “more than $700 million between 1996 and 2003,” and profits, which dropped to $1.3 billion in 2003 from $1.5 billion in 1996. They also denounce the “hostile work conditions” endured by Disney workers.
The media and entertainment giant’s latest quarterly results were due out yesterday, possibly offering Eisner relief if they continue the 2003 turnaround in the company’s fortunes following two bad years.
Comcast meanwhile, if it succeeds in its bid, would become a titan in the media world, having built an empire that includes the former cable television holdings of AT and T and a big Internet service operation.
