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Comcast lobs bid for Walt Disney

Los Angeles/New York, Feb. 11 (Reuters): Comcast Corp, the biggest US cable operator, on 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.

The unsolicited offer, which Comcast said it launched after Disney refused to enter into talks, increases the pressure on Disney CEO Michael Eisner, who has been fending off an attack by founding family shareholders bent on ousting him.

Shares of Disney, known for its theme parks, movie studio and ABC television network, jumped 16 per cent to a 19-month high and Comcast shares fell 9 per cent, eroding the premium the cable company had offered in its all-stock deal as investors bet on a higher price for the entertainment conglomerate.

Comcast CEO Brian Roberts, one of the media industry's savviest dealmakers, sent an open letter to Eisner 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 programming.

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.

Bigger than Warner

If successful, the deal would pit Comcast, which has 21 million cable subscribers, against Time Warner and News Corp as media conglomerates. On a combined basis, Disney and Comcast would have had 2003 revenues of $46 billion, topping the $40 billion recorded by Time Warner.

Disney said its board would evaluate the offer, but told its shareholders to take no action in the meantime.

Disney on Wednesday also reported that earnings for the first quarter ended December rose nearly 20-fold, to $688 million from $36 million a year earlier.

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 decade.

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 per cent 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.

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