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Disney Board Turns Down Comcast Takeover Bid
scifience writes "Disney's board of directors today turned down Comcast's hostile takeover bid, reports MSNBC. The board expressed confidence in Eisner's leadership. One interesting quote released by the board is that they will, '...carefully consider any legitimate proposal...' Does this mean that they did not believe Comcast's offer to be legitimate?"
That phrase is probably a hedge against lawsuits. If the board did not give the appearance of considering offers, then that would leave them open to lawsuits by shareholders for breach of duties.
According to economist article the Comcast offer was viewed as clearly low-ball. They would need to raise it by $8 per share to be on par with Disney perceived share value. What Disney may be doing is engaging in shrewd negotiations- the proper thing to do! I quote the salient paragraph from Economist article:
"Mr Eisner, one of the entertainment world's great survivors, will no doubt try to fight to the death. He may offer yet more corporate governance reforms--though the easy ones are mostly done. He will point out that Comcast's opening offer, originally worth $27 a share and falling, is too low--though Comcast has surely known all along that it will have to raise its offer closer to the $35 that Lawrence Haverty of State Street Research says would tempt institutional investors. The fact is, if Disney's board really wants to keep one of the world's iconic companies independent, its best strategy may be to replace Mr Eisner forthwith. Otherwise, Comcast will soon be doing it instead."
I've been hearing, for years, from people in the disney organisation about Eisner's childish tactics and thirst for power. The board is comprised of his yes men, they will do what he says. Roy Disney as much as said this in his letter of resignation http://savedisney.com/letters/ The other items in the letters section of Roy Disney's website http://savedisney.com will reenforce this.
Many of the problems now being publically brought up by Roy Disney and Stanley Gold are ones that I and people familiar with the internal workings of the Disney creative machine have been voicing for years. Eisner's got to go, for the good of the company.
I don't want to see Disney swallowed up by a large corporation. There's still time to turn it around and save it, but I do not beleive this will happen. I, personally, beleive that Disney will eventually be bought. I didn't expect it to happen, or even be contemplated, this soon, but I believe it is inevitable unless Eisner is outted and the company drastically changes course.
WTF? This gets modded up?
Doesn't anyone outside of business school learn basic economics anymore???
Selling Disney shares when this deal hit the street would have been contrary to common sense if you were "signing off on the deal."
Investors who believed in this deal would have BOUGHT Disney shares until they were priced the same as the Comcast offer. If you know I'll buy your shares of Disney stock on Friday for $44, and you can buy them from the market on Thursday for $34, would you buy? Sure you would. More people would buy in this situation, causing the price to rise toward the offer price. When the offer price is reached, the market may even go higher if enough people think the offer is too low, or if they think someone else will come in a make a larger offer. The market for Disney shares went up because enough investors DID believe this deal was possible. The market for Disney shares went higher than the Comcast offer because investors believe that Disney was being sold too cheap; that Comcast's offer was lower than it should have been.
The price variance of the target company is mostly related to the offer price and the odds of the deal going through, and the odds of a third party "white knight" coming in and upping the bid, although there are a lot more factors involved. The price variance of a predator company is much, much more complex and not something that can be taught in a
No one sells below the offered price because they "sign off on the deal" unless they're stupid, and stupid investors can't last long in the market because the market takes all their money. Investors are herd of hungry cattle looking for profit. Selling a stock for $34 when it has an open pending offer to buy the stock for $44 is stupid unless you believe the buyer won't complete the purchase and the intrinsic value of the company is less than the offer.
Wow. I'm stunned. I guess this is why I don't come to