Disney board under pressure on Comcast decision
Reuters, 02.15.04, 4:25 PM ET
By Peter Henderson
LOS ANGELES, Feb 15 (Reuters) - Wall Street has been cold toward Comcast Corp.'s bid to acquire Walt Disney Co. for about $50 billion in stock, but analysts said Disney's embattled board faces growing pressure to evaluate the merits of a merger with the largest U.S. cable operator.
Defensive options include finding a better suitor or trying to buy a rival programming distributor such as satellite operator EchoStar Communications Corp (nasdaq: DISH - news - people), analysts said. Disney's board also could just stand pat and wait for Comcast to raise its bid or walk away.
Chairman and Chief Executive Michael Eisner argues that Disney is already running full-bore as a premier provider of content like movies, TV shows and sports programming. But Disney's board, facing unrest from shareholders who accuse it of being a rubber stamp for Eisner's decisions, has agreed to study the proposed deal.
One expert said Disney's board was distancing itself from Eisner and guarding against possible shareholder lawsuits.
"They face enormous liability walking away from a financially sound offer, given the strategic logic of this partnership," said Yale School of Management Associate Dean Jeffrey Sonnenfeld. He said directors did not have time to consider an alternative to Comcast and doubted it existed.
A NATURAL FIT?
Comcast (nasdaq: CMCSA - news - people) Chief Executive Brian Roberts said on Wednesday that Eisner had dismissed his offer. Disney, an American entertainment icon and the home Mickey Mouse, also owns Hollywood's top studio, the ABC television network and the lucrative cable sports network ESPN.
Disney's presiding director George Mitchell promised a "thorough, careful review" of the Comcast offer at last week's investor conference, where he was very visible.
Sonnenfeld said Mitchell, a former Senate majority leader, was capable of standing up to Eisner and has the savvy to work with Comcast if it comes to that. "This is about doing the deal, and that he is very good at," Sonnenfeld said.
For many observers, the Disney and Comcast deal seems like a natural fit after the mergers that brought together News Corp Ltd.<NCP.AX> and DirecTV, Time Warner Inc' (nyse: TWX - news - people) and the recent tie-up of General Electric Co (nyse: TWX - news - people)'s NBC with Vivendi Universal Entertainment.
However, Eisner argues that Disney has never suffered for lacking a distributor. The Los Angeles Times reported on Saturday that Disney had also hired anti-takeover lawyer Marty Lipton in a sign that the company could be prepared to fight the proposed merger.
"A LITTLE LOW"
Many fund managers gathered at Walt Disney World in Orlando, Florida, last week backed Eisner. They said Disney could survive on its own, and balked at Comcast's offer as Disney's quarterly results blew past Wall Street estimates.
"I think that is a little low," said Mario Gabelli, chief executive of Gabelli Asset Management.
Comcast shares declined for three straight days last week after the all-stock bid was announced, valuing Disney at the end of the week at about $48 billion. More bullish analysts put the value as high as $70 billion. Disney shares lost ground on Friday but still ended the week at $26.92 compared with their implied value in Comcast stock of just $23.32.
"My guess is that Comcast was a day late and several dollars short. This was not good timing," said State Street Research analyst Larry Haverty, who said the board was behind Eisner. "This is not a broken company," he said.
That is an area of debate.
Comcast pounced as Disney battles to revive its ABC network, just after it opted not renew a blockbuster movie distribution deal with Pixar Animation Studios Inc. (nasdaq: PIXR - news - people), and while the founding Disney family, led by former director Roy Disney, is spearheading a campaign for Eisner's ouster..
Independent corporate governance analyst Institutional Shareholder Services, a strong influence on Wall Street, also recommended last week that shareholders vote against reelecting Eisner to the board in order to send a pro-reform message.
Eisner, in his defense, says results have improved dramatically at many divisions, especially the studio, and management says earnings will only get better.
"Fundamentally we see values for Disney based not only on our own numbers but the analyst community as somewhere in the mid 30s," said Steven Cohen, chief investment officer of hedge fund Kellner DiLeo Cohen & Co, shortly after the Comcast bid.
Cohen expected Comcast to raise its offer in a move that would only increase the pressure on the Disney board to deal.
"You certainly would not go in with your best bid," Cohen said.
Copyright 2004, Reuters News Service
http://www.forbes.com/home_asia/newswire/2004/02/15/rtr1261814.html
Reuters, 02.15.04, 4:25 PM ET
By Peter Henderson
LOS ANGELES, Feb 15 (Reuters) - Wall Street has been cold toward Comcast Corp.'s bid to acquire Walt Disney Co. for about $50 billion in stock, but analysts said Disney's embattled board faces growing pressure to evaluate the merits of a merger with the largest U.S. cable operator.
Defensive options include finding a better suitor or trying to buy a rival programming distributor such as satellite operator EchoStar Communications Corp (nasdaq: DISH - news - people), analysts said. Disney's board also could just stand pat and wait for Comcast to raise its bid or walk away.
Chairman and Chief Executive Michael Eisner argues that Disney is already running full-bore as a premier provider of content like movies, TV shows and sports programming. But Disney's board, facing unrest from shareholders who accuse it of being a rubber stamp for Eisner's decisions, has agreed to study the proposed deal.
One expert said Disney's board was distancing itself from Eisner and guarding against possible shareholder lawsuits.
"They face enormous liability walking away from a financially sound offer, given the strategic logic of this partnership," said Yale School of Management Associate Dean Jeffrey Sonnenfeld. He said directors did not have time to consider an alternative to Comcast and doubted it existed.
A NATURAL FIT?
Comcast (nasdaq: CMCSA - news - people) Chief Executive Brian Roberts said on Wednesday that Eisner had dismissed his offer. Disney, an American entertainment icon and the home Mickey Mouse, also owns Hollywood's top studio, the ABC television network and the lucrative cable sports network ESPN.
Disney's presiding director George Mitchell promised a "thorough, careful review" of the Comcast offer at last week's investor conference, where he was very visible.
Sonnenfeld said Mitchell, a former Senate majority leader, was capable of standing up to Eisner and has the savvy to work with Comcast if it comes to that. "This is about doing the deal, and that he is very good at," Sonnenfeld said.
For many observers, the Disney and Comcast deal seems like a natural fit after the mergers that brought together News Corp Ltd.<NCP.AX> and DirecTV, Time Warner Inc' (nyse: TWX - news - people) and the recent tie-up of General Electric Co (nyse: TWX - news - people)'s NBC with Vivendi Universal Entertainment.
However, Eisner argues that Disney has never suffered for lacking a distributor. The Los Angeles Times reported on Saturday that Disney had also hired anti-takeover lawyer Marty Lipton in a sign that the company could be prepared to fight the proposed merger.
"A LITTLE LOW"
Many fund managers gathered at Walt Disney World in Orlando, Florida, last week backed Eisner. They said Disney could survive on its own, and balked at Comcast's offer as Disney's quarterly results blew past Wall Street estimates.
"I think that is a little low," said Mario Gabelli, chief executive of Gabelli Asset Management.
Comcast shares declined for three straight days last week after the all-stock bid was announced, valuing Disney at the end of the week at about $48 billion. More bullish analysts put the value as high as $70 billion. Disney shares lost ground on Friday but still ended the week at $26.92 compared with their implied value in Comcast stock of just $23.32.
"My guess is that Comcast was a day late and several dollars short. This was not good timing," said State Street Research analyst Larry Haverty, who said the board was behind Eisner. "This is not a broken company," he said.
That is an area of debate.
Comcast pounced as Disney battles to revive its ABC network, just after it opted not renew a blockbuster movie distribution deal with Pixar Animation Studios Inc. (nasdaq: PIXR - news - people), and while the founding Disney family, led by former director Roy Disney, is spearheading a campaign for Eisner's ouster..
Independent corporate governance analyst Institutional Shareholder Services, a strong influence on Wall Street, also recommended last week that shareholders vote against reelecting Eisner to the board in order to send a pro-reform message.
Eisner, in his defense, says results have improved dramatically at many divisions, especially the studio, and management says earnings will only get better.
"Fundamentally we see values for Disney based not only on our own numbers but the analyst community as somewhere in the mid 30s," said Steven Cohen, chief investment officer of hedge fund Kellner DiLeo Cohen & Co, shortly after the Comcast bid.
Cohen expected Comcast to raise its offer in a move that would only increase the pressure on the Disney board to deal.
"You certainly would not go in with your best bid," Cohen said.
Copyright 2004, Reuters News Service
http://www.forbes.com/home_asia/newswire/2004/02/15/rtr1261814.html