Cable operator Comcast Corp on Wednesday launched a surprise bid to buy Walt Disney Co for about US$50 billion in stock, a deal that would create the world's largest media company and further threatens embattled Disney chief executive Michael Eisner.
Comcast chief executive Brian Roberts said he made the unsolicited all-stock offer public after Eisner personally turned it down on Monday. Eisner was already under fire from Disney founding-family shareholders bent on ousting him.
PHOTO: EPA
The proposed deal could redraw the US media landscape, inviting comparisons with the merger of America Online and Time Warner that closed in 2001, which was initially much heralded but dismally failed to meet expectations.
The Disney board met on Wednesday and asked bank advisers to analyze the offer, which would join the No. 1 US cable operator with Hollywood's top film studio, broadcaster ABC, sports channel ESPN, worldwide theme parks and a stable of animated characters from Mickey Mouse to the Lion King.
Disney and Comcast would follow in the footsteps of Time Warner and News Corp, both merger-forged media conglomerates that also combine programming and TV distribution. But a Disney-Comcast combination would overpower its two rivals by revenue.
Investors bid up Disney shares as much as 16 percent, while Comcast shares fell as much as 9 percent, as investors bet that the Comcast offer would be raised or topped by a rival.
"The price is too low," said Mel Tukman of Tukman Capital Management, which manages 15 million shares of Disney. "[Disney executives] are managing to improve fundamentals on almost every front while this is happening."
Comcast's offer, which would exchange 0.78 of a Comcast class A share for each Disney share, originally valued Disney at US$26.47 a share, a 10 percent premium to Tuesday's close.
Disney shares touched US$27.95, their highest level since July 2001, in heavy trade of 70 million shares on Wednesday, some nine times the average turnover in the past three months.
Roberts, considered one of the media industry's savviest dealmakers, sent Eisner an open letter saying it was "unfortunate" that the Disney chairman and chief executive 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.
He also vowed Comcast would be a disciplined buyer. "We've walked away before," he told reporters.
Merrill Lynch analyst Jessica Reif Cohen called the proposed merger a "perfect, brilliant combination." But she cut her rating on Comcast to "neutral" from "buy," saying its shares would be under pressure.
Comcast executive vice president Stephen Burke, who spent 12 years at Disney, said Comcast could squeeze US$800 million to US$1.2 billion in additional cash flow within three years. The cable operator plans to make operations run more smoothly and to launch new channels in conjunction with Disney.
The Comcast bid comes as Roy Disney, the nephew of company founder Walt Disney and a former board member, ramps up his bid to unseat Eisner, whom he accuses of mismanaging the company over the past decade and draining Disney's creative strength.
Disney on Wednesday reported earnings rose to US$688 million, or US$0.33 a share, in its fiscal first quarter ended in December, from US$36 million, or US$0.02 a share, a year earlier. The results, while overshadowed by the Comcast offer, topped the Wall Street consensus of US$0.23 per share.
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