From CBS MarketWatch
What's Disney worth to Comcast?
Companies may be farther from, not closer to, a deal
By Russ Britt, CBS.MarketWatch.com
Last Update: 7:06 PM ET March 10, 2004
LOS ANGELES (CBS.MW) - Walt Disney Chief Executive Michael Eisner is on the ropes, the company's board is rattled from a troubling shareholder vote and the Mouse's value is well below its peak.
Good time for Comcast Corp. to go in for the kill, right? Not so fast, say analysts and researchers.
While Comcast has a reputation for tenacity, its $66 billion proposal to buy Disney doesn't have the same urgency as its 2001 deal to buy AT&T's broadband unit. Further, Disney may not be as vulnerable as it seems.
"I don't think it's any more likely now," said David Joyce, analyst for Guzman & Co. "I don't think that it's going to get done."
Comcast and Disney currently are in a standoff. Comcast has indicated its unwillingness to pay any more for Disney, a move that could easily be seen as posturing. But Comcast Chief Executive Brian Roberts probably is telling the truth when he says he won't go above the $26.47 a share he's now bidding for Disney, analysts say.
For one, Comcast investors gapped down the company's shares by $2 upon the Feb. 11 announcement. The stock continues to trend downward.
And save for a sector-wide drop that also hit Disney shares Wednesday, the company's stock hasn't really dropped significantly from the levels it reached when Comcast first made its offer last month.
While that could change, consider that Disney's stock wavered little after last week's momentous no confidence vote in which 43 percent of the company's shareholders opted to boot Eisner off the board. Other directors got a relatively high 14 percent or more "no" vote.
Disney (DIS: news, chart, profile) shares were off 78 cents, or 3 percent, to $25.45 Wednesday. Analysts say the drop off was due to cyclical sector-wide concerns about a dip in advertising as other major media concerns experienced similar losses. Shares of Comcast (CMCSK: news, chart, profile) (CMCSA: news, chart, profile) were off 10 cents to $28.71.
Working in Disney's favor are reports that value its holdings at up to $35 a share, said Samuel C. Thompson, director of the UCLA Law School's Center for the Study of Mergers and Acquisitions.
"I don't see a significant pullback in their shares," Thompson said. "Unless they raise their bid, Comcast is highly unlikely to succeed here."
Comcast officials say they won't be raising their bid. In response to Disney President Bob Iger's assertion earlier this week that a higher bid is likely, Comcast responded by alluding to last week's shareholder vote and saying: "Disney's independent directors should immediately meet with Comcast so we can directly present our full and generous proposal and the benefits of the merger."
Comcast has a reputation for tenacity, built largely on its successful $47 billion bid in 2001 for AT&T's broadband business. After receiving an initial bid in July of that year, AT&T finally relented in December. By then, Comcast had raised its offer 24 percent.
Analysts say that was then, this is now.
"That was something I think they needed to do because they needed more scale in their core competency," said Guzman's Joyce.
Others point out that Disney has fended off takeover bids before. The movement that brought Eisner to power in 1984 was engineered by Roy Disney to keep a number of potential suitors at bay. Roy Disney and partner Stanley Gold now seek to remove Eisner.
Roberts is probably correct in saying that he doesn't need Disney, analysts say.
"He doesn't need it. It would be really nice for them to have," said Kevin Calabrese of Argus Research. "He's got to be careful about not overpaying."
But if Roberts is posturing, it seems transparent, said Paul Kim of Tradition Asiel Securities. Iger probably had that in mind when he suggested a higher bid was on the way.
"Comcast is in kind of a naked bluff here," he said. "The naked bluff has been called."
Kim and other analysts say Comcast needs to convince Wall Street and investors that it can truly run Disney. Taking over AT&T's business was easy, given the two businesses were similar. The question now is whether Comcast can run Disney's theme parks, film studios and a television network.
"Can Comcast really run those businesses better than Disney? (Roberts) has to convince shareholders of that," said David Miller of Sanders Morris Harris.
Kim is one of the few who thinks Disney's stock is overvalued and primed to drop below $20. He said that wouldn't be enough to convince anyone that a Comcast bid would be good for Disney assets.
"I don't think that'll ever fly," he said.
Comcast has maintained that it can run Disney. Roberts points out Steve Burke, president of its cable operations, once was a prominent Disney executive.
One thing working in Comcast's favor, experts say, is that Eisner probably will have less of a say as chief executive than when he had the chairman's title as well. Former Sen. George Mitchell became Disney's chairman after last week's shareholder vote.
Disney's board is expected to meet in late April, and probably will have a full agenda. Among the items it considers could be a succession plan for Eisner - who has 20 years at Disney's helm - and what defenses to put up against Comcast.
If Eisner is replaced, Disney's board will have to find a suitable replacement that will keep its stock afloat and Comcast at bay. Such names as News Corp. Chief Operating Officer Peter Chernin have been dropped, but Chernin told a conference this week he's likely to renew his contract.
Analysts are skeptical that Disney could recruit Chernin, who made $17 million in salary and bonuses last year, three times that of Eisner.
"No one at Disney makes that kind of money," said Sanders Morris's Miller. "I think Michael Eisner will be very tough to replace."
What's Disney worth to Comcast?
Companies may be farther from, not closer to, a deal
By Russ Britt, CBS.MarketWatch.com
Last Update: 7:06 PM ET March 10, 2004
LOS ANGELES (CBS.MW) - Walt Disney Chief Executive Michael Eisner is on the ropes, the company's board is rattled from a troubling shareholder vote and the Mouse's value is well below its peak.
Good time for Comcast Corp. to go in for the kill, right? Not so fast, say analysts and researchers.
While Comcast has a reputation for tenacity, its $66 billion proposal to buy Disney doesn't have the same urgency as its 2001 deal to buy AT&T's broadband unit. Further, Disney may not be as vulnerable as it seems.
"I don't think it's any more likely now," said David Joyce, analyst for Guzman & Co. "I don't think that it's going to get done."
Comcast and Disney currently are in a standoff. Comcast has indicated its unwillingness to pay any more for Disney, a move that could easily be seen as posturing. But Comcast Chief Executive Brian Roberts probably is telling the truth when he says he won't go above the $26.47 a share he's now bidding for Disney, analysts say.
For one, Comcast investors gapped down the company's shares by $2 upon the Feb. 11 announcement. The stock continues to trend downward.
And save for a sector-wide drop that also hit Disney shares Wednesday, the company's stock hasn't really dropped significantly from the levels it reached when Comcast first made its offer last month.
While that could change, consider that Disney's stock wavered little after last week's momentous no confidence vote in which 43 percent of the company's shareholders opted to boot Eisner off the board. Other directors got a relatively high 14 percent or more "no" vote.
Disney (DIS: news, chart, profile) shares were off 78 cents, or 3 percent, to $25.45 Wednesday. Analysts say the drop off was due to cyclical sector-wide concerns about a dip in advertising as other major media concerns experienced similar losses. Shares of Comcast (CMCSK: news, chart, profile) (CMCSA: news, chart, profile) were off 10 cents to $28.71.
Working in Disney's favor are reports that value its holdings at up to $35 a share, said Samuel C. Thompson, director of the UCLA Law School's Center for the Study of Mergers and Acquisitions.
"I don't see a significant pullback in their shares," Thompson said. "Unless they raise their bid, Comcast is highly unlikely to succeed here."
Comcast officials say they won't be raising their bid. In response to Disney President Bob Iger's assertion earlier this week that a higher bid is likely, Comcast responded by alluding to last week's shareholder vote and saying: "Disney's independent directors should immediately meet with Comcast so we can directly present our full and generous proposal and the benefits of the merger."
Comcast has a reputation for tenacity, built largely on its successful $47 billion bid in 2001 for AT&T's broadband business. After receiving an initial bid in July of that year, AT&T finally relented in December. By then, Comcast had raised its offer 24 percent.
Analysts say that was then, this is now.
"That was something I think they needed to do because they needed more scale in their core competency," said Guzman's Joyce.
Others point out that Disney has fended off takeover bids before. The movement that brought Eisner to power in 1984 was engineered by Roy Disney to keep a number of potential suitors at bay. Roy Disney and partner Stanley Gold now seek to remove Eisner.
Roberts is probably correct in saying that he doesn't need Disney, analysts say.
"He doesn't need it. It would be really nice for them to have," said Kevin Calabrese of Argus Research. "He's got to be careful about not overpaying."
But if Roberts is posturing, it seems transparent, said Paul Kim of Tradition Asiel Securities. Iger probably had that in mind when he suggested a higher bid was on the way.
"Comcast is in kind of a naked bluff here," he said. "The naked bluff has been called."
Kim and other analysts say Comcast needs to convince Wall Street and investors that it can truly run Disney. Taking over AT&T's business was easy, given the two businesses were similar. The question now is whether Comcast can run Disney's theme parks, film studios and a television network.
"Can Comcast really run those businesses better than Disney? (Roberts) has to convince shareholders of that," said David Miller of Sanders Morris Harris.
Kim is one of the few who thinks Disney's stock is overvalued and primed to drop below $20. He said that wouldn't be enough to convince anyone that a Comcast bid would be good for Disney assets.
"I don't think that'll ever fly," he said.
Comcast has maintained that it can run Disney. Roberts points out Steve Burke, president of its cable operations, once was a prominent Disney executive.
One thing working in Comcast's favor, experts say, is that Eisner probably will have less of a say as chief executive than when he had the chairman's title as well. Former Sen. George Mitchell became Disney's chairman after last week's shareholder vote.
Disney's board is expected to meet in late April, and probably will have a full agenda. Among the items it considers could be a succession plan for Eisner - who has 20 years at Disney's helm - and what defenses to put up against Comcast.
If Eisner is replaced, Disney's board will have to find a suitable replacement that will keep its stock afloat and Comcast at bay. Such names as News Corp. Chief Operating Officer Peter Chernin have been dropped, but Chernin told a conference this week he's likely to renew his contract.
Analysts are skeptical that Disney could recruit Chernin, who made $17 million in salary and bonuses last year, three times that of Eisner.
"No one at Disney makes that kind of money," said Sanders Morris's Miller. "I think Michael Eisner will be very tough to replace."
Imagine how many heads would explode on this board. :lol: