In a press release, Burbank, Calif.-based Disney (DIS: news, chart) said its board "will carefully evaluate" Comcast's unsolicited proposal.
During a conference call with securities analysts, Comcast CEO Brian Roberts said he hoped that Disney's board would "do the right thing" and accept the terms.
"It's a logical next step" for Philadelphia-based Comcast (CMCSK: news, chart) (CMCSA: news, chart) to expand its drive to add more content capabilities, Roberts said during a press conference. Discuss the bid.
Disney's stock rocketed $3.31, or nearly 14 percent, to $27.39, after earlier hitting a 52-week high of $28. Comcast fell $2.40, or 7 percent, to $31.53.
Terms of the deal, which includes the assumption of $11.9 billion in Disney debt, call for Comcast to exchange 0.78 shares of its Class A common stock for each Disney share outstanding. Disney is a component of the Dow Jones Industrial Average.
Based on Tuesday's closing prices, the deal would value Disney stock at $26.47 each, a 9.9 percent premium, and above the previous 52-week high of $25.08.
Disney shareholders were celebrating the prospect of Disney's stock price rising during what could become a lengthy and contentious takeover battle.
"We're thrilled," said Angela Kohler, global media analyst with Federated Investors in Pittsburgh. "We expect the price could go higher."
Federated had said that $30 a share represents a fair-value price for Disney. Comcast's Roberts declined to speculate on how high the company would bid.
Comcast may have an edge in the negotiations. Steve Burke, a senior Comcast executive, worked at Disney for many years.
Kohler doesn't expect a third party to enter the fray and challenge Comcast as it tries to buy Disney. "But we've learned to expect originality in media deals," she said.
During a conference call with securities analysts, Comcast CEO Brian Roberts said he hoped that Disney's board would "do the right thing" and accept the terms.
"It's a logical next step" for Philadelphia-based Comcast (CMCSK: news, chart) (CMCSA: news, chart) to expand its drive to add more content capabilities, Roberts said during a press conference. Discuss the bid.
Disney's stock rocketed $3.31, or nearly 14 percent, to $27.39, after earlier hitting a 52-week high of $28. Comcast fell $2.40, or 7 percent, to $31.53.
Terms of the deal, which includes the assumption of $11.9 billion in Disney debt, call for Comcast to exchange 0.78 shares of its Class A common stock for each Disney share outstanding. Disney is a component of the Dow Jones Industrial Average.
Based on Tuesday's closing prices, the deal would value Disney stock at $26.47 each, a 9.9 percent premium, and above the previous 52-week high of $25.08.
Disney shareholders were celebrating the prospect of Disney's stock price rising during what could become a lengthy and contentious takeover battle.
"We're thrilled," said Angela Kohler, global media analyst with Federated Investors in Pittsburgh. "We expect the price could go higher."
Federated had said that $30 a share represents a fair-value price for Disney. Comcast's Roberts declined to speculate on how high the company would bid.
Comcast may have an edge in the negotiations. Steve Burke, a senior Comcast executive, worked at Disney for many years.
Kohler doesn't expect a third party to enter the fray and challenge Comcast as it tries to buy Disney. "But we've learned to expect originality in media deals," she said.
Don't be so sure. Since it is an all-stock deal the market will determine if this deal gets done. If Comcast "raises" its bid, the market could just as easily decide they don't want to pay that much and bid down their shares to the point where the deal value doesn't change. And since Disney shares are trading above the deal right now I am guessing that it will be rejected quickly and probably is less than 50/50 of ever getting done. End result though, most importantly, is that Michael Eisner is probably on his way out the door. This deal just illustrates how much shareholders don't believe in him at the helm of this company and want to have other management installed. Eisner gets dumped, price goes up even more, then Comcast just can't get the deal done...likely way it plays out.
It's a small world after all!
sb
i am a disney shareholder - have been for a LONG time - and would sell ASAP if this went thru.
fyi - here is the letter comcast sent to mikey eisner:
Text of Comcast's Letter to Disney
The text of the letter sent by Comcast CEO Brian L. Roberts to Disney's
Michael D. Eisner, as provided by Comcast:
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
fyi - here is the letter comcast sent to mikey eisner:
Text of Comcast's Letter to Disney
The text of the letter sent by Comcast CEO Brian L. Roberts to Disney's
Michael D. Eisner, as provided by Comcast:
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
