Comcast Wants To Buy Disney For $66 Billion

BenBenBen writes "Comcast have made a surprise $66 billion bid for Disney. The public bid (aimed at swaying shareholders) follows a period of secret negotiation which resulted in Eisner saying no. Comcast has a statement on their website and there is better coverage available here."

Comments

Re:Hostile takeover?

[B00yah]

No, a hostile takeover is where you buy a controlling percentage of the company's stock, to overthrow their board.

This is just a business tactic to try and sway the devil that is Eisner..

Roberts' letter to Eisner - full text

[Anonymous Coward]

I say ---fine! What you are going to see is, competing cable/sat companies avoiding as much any Disney-branded product as possible, lest they subsidize their own competition.

This merger proposal is all about Roberts' ego.

Here's the letter:
**************

February 11, 2004

Mr. Michael D. Eisner
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521

Dear Michael:

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.

We have a wonderful opportunity to create a company that combines distribution and content in a way that is far stronger and more valuable than either Disney or Comcast can be standing alone. To this end, we are proposing a tax-free stock for stock merger in which Comcast would issue 0.78 of a share of its Class A voting common stock for each share of Disney. This represents a premium of over $5 billion for your shareholders, based on yesterday's closing prices. Under our proposal, your shareholders would own approximately 42% of the combined company.

The combined company would be uniquely positioned to take advantage of an extraordinary collection of assets. Together, we would unite the country's premier cable provider with Disney's leading filmed entertainment, media networks and theme park properties. In addition to serving over 21 million cable subscribers, Comcast is also the country's largest high speed internet service provider with over 5 million subscribers. As you have expressed on several occasions, one of Disney's top priorities involves the aggressive pursuit of technological innovation that enhances how Disney's content is created and delivered. We believe this combination helps accelerate the realization of that goal-whether through existing distribution channels and technologies such as video-on-demand and broadband video streaming or through emerging technologies still in development-to the benefit of all our shareholders, customers and employees.

We believe that improvements in operating performance, business creation opportunities and other combination benefits will generate enormous value for the shareholders of both companies. Together, as an integrated distribution and content company, we will be best positioned to meet our respective competitive challenges.

We have a stable and respected management team with a great track record for creating shareholder value. In fact, our shares have consistently outperformed leading stock indices by significant margins, including the S&P 500 by a margin of more than 2 to 1 since Comcast went public in 1972. The Comcast management team greatly appreciates and is highly respectful of the Disney heritage. We know that there are many talented executives at Disney who we envision would also play a key role in managing the combined company. We also would welcome directors from your Board joining our Board. We have analyzed the issues associated with regulatory approval and are confident that all necessary approvals can be obtained in a timely fashion. Given the landscape that has evolved in our industry over the past few years, the creation of integrated content and distribution companies is essential to increasing the level of competition. The FCC's existing program access and program carriage rules ensure that the combined company will continue to make all of its satellite-delivered national and regional cable networks available on a non-exclusive, non-discriminatory basis and that there will be no discrimination against unaffiliated programming services, all consistent with the undertakings made by News Corp. in its recent acquisition of DirecTV. We hope that the Disney Board will pursue the opportunity that this proposed combination presents to your shareholders.

Very truly yours,

Brian L. Roberts
President and Chief Executive Officer

Cc: Board of Directors,
The Walt Disney Company

Re:Question from non-usa

[leifm]

They're the largest cable provider here, and I think they are the number 2 ISP, maybe the largest broadband provider, not sure. At any rate I have comcast basic extended cable, and internet access and that runs about $100 a month, so multipy that by a few mil and they're probably doing ok.

This suprises me though, I expected Microsoft to attempt to by Comcast at some point, but not Comcast to buy Disney...

Re:Whoa

[Anonymous Coward]

Umm, no Pixar is an indepented animation studio. Until recently they had an agreement to have their films distributed by Disney. See also:

http://pixar.com/companyinfo/aboutus/index.html

Re:Hostile takeover?

[Uninvited Guest]

Allow me to refine this fine explanation. A majority interest is when a single shareholder or group of shareholders owns more than 50% of all stock, and so can always override the votes of all other shareholders combined. A controlling interest is owning just enough stock to outvote the next largest voting block.

The buyer (Comcast) would like to buy a controlling interest in Disney, so they can appoint their own board members and chairman. So, if Eisner and his allies own 30% of all Disney stock, Comcast would need to buy just 31% to be able to outvote Eisner and friends every time. That gives Comcast the power to elect a new board of directors, who selects a new chairman of the board to replace Eisner. The new chairman serves Comcast, lest he also be replaced by Comcast.

I think it's only a "hostile" takeover when the management of the company to be bought opposes the sale. The company shareholders may be quite favorable to the buyout.

Re:Good Investment?

[Zeinfeld]

With the death of their traditional 2d animation studio and Pixas leaving is Disney really an investment anymore? I don't think Disney World is worth 66 billion.

Disney owns the ABC network, several cable channels, the theme parks, two major studios and a huge catalog of material. They also have a global brand and can market their stuff worldwide.

The point is that Disney is not making anywhere near what those assets should produce. They are in a situation very similar to the pre-Eisner Disney.

The point of a takeover would be to ditch Eisner. That would be the quickest way of getting the company moving again. he did great for the company when he started. But he has gone flabby. Disney has not been scoring the hits it needs to keep the Empire going.

Look at the Mickey Mouse brand. My kid does not know who Mickey is. If you don't work the brand it soon looses traction. My kid knows Dora the Explorer and Max and Ruby better than what was once the worlds best known cartoon character.

The other problem with Disney is that the mawkish sentimentality that worked well through the 50s and 60s is no longer so much in vogue.

Disney needs a Jim Collins makeover.

Re:Question from non-usa

[Hamhock]

Comcast is more of just a cable company. They are a media company, closer to the likes of Disney then you might think. They are a majority shareholder in the QVC channel, have a controlling interest in the E! Entertainment channel, own the Golf channel and Outdoor Life networks, own the G4 games channel, and own several sports teams.

Re:Hostile takeover?

[numark]

Technically that money only exists on paper. Typically, what happens is that the acquiring company issues shares of its stock that amount to the value of the deal. In this case, Comcast is issuing Disney shareholders 0.78 shares of Comcast for every 1 share of Disney stock they own (if the deal passes, that is). Since it's highly unlikely 100% will (or even could) be liquidated in the market, there will probably never be $66 billion to be seen.

A partial listing of what Comcast would own

[tverbeek]

Comcast Cable TV
Comcast Internet
Disney Studios
Disney Animation (including The Mouse et al.)
Touchstone Pictures
Miramax
Buena Vista Studios
Buena Vista Theaters
Buena Vista Music
Disneyland/world/resorts/etc
ESPN
Disney Stores
Lifetime
A&E
E!
ABC
Radio Disney
Hyperion Books
SOAPnet
History Channel
Go.com
Movies.com

Re:Hostile takeover?

[nelsonal]

It's unsolicited, which is the first step to a hostile takeover. In a corporation the stockholders have a group known as the Board of Directors who represent them legally. This is doen to save time educating all the stockholders from complex issues, and let a few people specialize in the company. The board makes decisions for the stockholders on upper management, offers to buy or sell major assets, stock issuance and repurchase policies, compenstion plans, and other big issues (some charters require a vote of all the shareholders for these items). Sometimes board members offer other skills or advantages, like a financial/management expert on a startup or Cheney at Haliburton (brought goodwill of many oil rich middle eastern countries).
In the real world the board is ususally quite close to current management, most CEOs are also chairman of the board, and there are usually several former executives on the board. Disney has one of the more management friendly boards (Eisner was able to boot the founder's son off the board). Apple also fits in this boat.
When a company wants to buy another one, they usually go speak with current managment who is sometimes receptive, and negotiations begin, or isn't and an unsolicited offer is made, or the acquirer seeks more receptive management. A hostile takeover requres the rejection of the unsolicited offer, then a proxy fight. Proxy statements are the documents that are sent in preparation for a board meeting since most votes occur by proxy. This is the way new boards are elected. Incidentally, offers are usually at a large premium to the current price, and are one of the few things that almost always result in insider trading convictions if you get caught.
Shareholders get to vote, and management offers a slate of directors who do not want to sell and the acquirer offers a slate of directors who does. Usually the potential acquirer has already pruchased 5% of the company (which votes for the merger), that is the limit at which your ownership must be disclosed.
The reason the fight occurs is that in a takeover the current management is sacked and replaced with a management team from the new company. Oracle is currently trying a hostile takeover of Peoplesoft. Although that one has largely been fought in the DOJ halls rather than in a proxy battle (proxy fights are what HP went through prior to the Compaq acquisition).