Comcast Corp., the
biggest U.S. cable operator, Wednesday launched a surprise bid to
buy Walt Disney Co. for more than $54 billion, in a deal that
would create the world's largest media company by revenue.
unsolicited offer, which Comcast said it launched after Disney
refused to enter into talks, increases the pressure on Disney
Chief Executive Michael Eisner, who has been fending off an
attack by founding family shareholders bent on oustr saying it was
"unfortunate" the Disney chief had rejected friendly merger talks.
"Given this, the only way for us to proceed is to make a public
proposal directly to you and your board," Roberts said.
Merrill Lynch analyst Jessica Reif Cohen called the proposed
merger a "perfect, brilliant combination," noting Comcast's
ability to squeeze value from previous buys and the matchup of
Comcast's distribution network and Disney's entertainment
But she cut her rating on Comcast to "neutral" from "buy,"
saying its bid was probably only an opening salvo and its shares
would be under pressure.
If successful, the deal would pit Comcast, which has 21 million
cable subscribers, against Time Warner Inc. and News Corp. as
media conglomerates. On a combined basis, Disney and Comcast would
have had 2003 revenues of $46 billion, topping the nearly $40
billion recorded by Time Warner.
Disney on Wednesday also reported earnings for its fiscal first
quarter ended in December rose nearly 20-fold, to $688 million
from $36 million a year earlier, driven by its industry-leading
Disney has been stung recently by its failure to renew a key
contract with animated filmmaker Pixar Animation Studios Inc., the
maker of hit films "Finding Nemo" and "Toy Story,"
and by the criticism of former directors Roy Disney and Stanley
Gold, who accuse Eisner of mismanaging the company over the past
Comcast proposed exchanging 0.78 of a Comcast class A share for
each Disney share, which valued Disney at $26.47 a share, a 10
percent premium over Disney's share price, based on Tuesday's
closing share prices. Comcast valued the deal at $66 billion,
including the assumption of $11.9 billion in debt.
"I think Disney is worth a lot more money," said Knox Fuqua,
fund manager at the AAM Equity Fund, which owns Disney shares.
Timothy Ghriskey, portfolio manager with Ghriskey Capital
Partners, said, "One would have to think that the Comcast bid
would have to be raised significantly to get this deal done, given
the lack of much premium in the current bid and a still somewhat
depressed Disney stock price."
Disney, the nephew of company founder Walt Disney, declined to
comment on the Comcast offer, which was made independently of his
anti-Eisner campaign, a spokesman said.
Roy Disney has been lobbying institutional shareholders to vote
against the reelection of Eisner and three other directors at the
upcoming shareholders meeting on March 3.
Disney has fought back with a public campaign of its own,
citing the film studio's No. 1 box office performance last year
and its expectation for growth in earnings per share at least 30
percent this fiscal year.
A Disney meeting for institutional investors and analysts is
set to begin on Wednesday in Orlando, Florida.
Comcast had used a similar "bear hug" campaign in July 2001,
when it launched an unsolicited proposal to buy AT&T Corp.'s cable
assets, then known as AT&T Broadband. Over a year later, it
successfully closed that deal for about $40 billion.
Comcast's cable systems are headed by Stephen Burke, a former
Disney executive who was president of ABC's television stations
group and president
of Euro Disney.
Comcast is being advised by Morgan Stanley, JPMorgan,
quadrangle Group and Rohatyn Associates.
Shares of Disney rose $3.50 to $27.58 on the New York Stock
Exchange. Shares of Comcast fell $2.66, or 7.8 pct, $31.27.
NOTE: The Walt Disney Company is the parent
company of KABC-TV.