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Disney Buys Marvel For $4 Billion: What Does It Mean For the Economy?

In a previous life, The Ticker covered the media and entertainment industry and spent a lot of time caring about the Walt Disney Co.

Former chief executive Michael Eisner built an animation and theme park company into a media giant, which at one point included movie studios, television (ABC/ESPN), radio and two sports teams.

But Eisner fell into disfavor, partly thanks to his large compensation and disastrous move of hiring and then firing Michael Ovitz to help run the company. Then, his successful -- but autocratic -- efforts at fending off Comcast's takeover bid in 2004 led to a shareholder revolt, cost him his chairman's title and then, finally, in 2005, his resignation.

Since Eisner's resignation, his successor, Bob Iger, has looked to mend fences and make some acquisitions. Today's $4 billion purchase of Marvel Entertainment is Iger's latest move.

The deal brings Spider-Man, Iron Man, Captain America and the X-Men in under the Disney tent to cohabitate with Mickey Mouse, Tinkerbell, Wall*E, the Little Mermaid and Bambi. Talk about a mixed marriage.

Aside from creating a non-stop string of summer blockbuster animated and live-action comic book movies from now until, oh, 2080, what does the big merger mean for the economy?

Plenty. This is a cash-and-stock deal, not a leveraged deal, and that's the difference between 2009 and 2004.

Most big deals are built on credit, or borrowed money, meaning they are leveraged. Sometimes, it's commercial money, sometimes it's private money from a private equity group. Either way, it comes at a price -- interest. (Massive over-leveraging in its going-private deal led Tribune into bankruptcy.)

In the early part of this decade, credit flowed like crazy for M&A, as everyone wanted to get into the game. Billions of dollars sat in private-equity funds as recently as three years ago, just looking for a deal to enter.

Now, things are different.

Under the terms of today's deal, Marvel shareholders will get a total of $30 per share in cash plus .745 Disney shares for each Marvel share they own. Disney has about $3.3 billion in cash and cash equivalents on its balance sheet (as of the second-quarter earnings report in May) and clearly had been looking for something to do with it.

Enter Marvel, a comic book empire whose modern era began in 1961 at the pen of Stan Lee, father of the Fantastic Four and the web-slinger.

In the deal, Marvel is valued at $50 per share. Disney is trading today at about $26 per share, down on the day, which is typical for an acquiring company.

To fund the deal, Disney will issue about 59 million shares, company chief financial officer Tom Staggs said in a call this morning, which is the same amount Disney was planning to buy back next year to prevent dilution and drive up share price.

So instead of just getting shares back, Disney gets a whole other animation studio. Corporate cultures rarely marry well and Disney and Marvel could chafe over issues from animation style to distribution to marketing.

But from a deal standpoint, it's a much more soberly constructed tie-up than the highly leveraged ones we've seen in the past, which seemed to defy gravity, much like Spidey climbing up a wall.

-- Frank Ahrens
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By Frank Ahrens  |  August 31, 2009; 11:00 AM ET
Categories:  The Ticker  | Tags: Bob Iger, Disney, Marvel, Michael Eisner  
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Comments

I wonder what happens with Universal Studio's Islands of Adventure - where many of the rides are themed on Marval characters and is obviously a major competitor for Disney World.

Posted by: DRPinDC | August 31, 2009 12:06 PM | Report abuse

D lever age and set the bar higher. This could get funner.

Posted by: Dermitt | August 31, 2009 12:08 PM | Report abuse

will mickey be suiting up any time soon...
you know an alternate universe version where mickey stark becomes the invincible iron mouse...

Posted by: DwightCollins | August 31, 2009 12:08 PM | Report abuse

Wait and see. The mouse could be MOSS. Don't trap the BOSS.

Posted by: Dermitt | August 31, 2009 12:12 PM | Report abuse

that a comic book empire can be sold for $4billion while american industry is in the toilet speaks enormously about the decline of the american empire, and what is wrong with the stock market..

Posted by: w04equals666 | August 31, 2009 12:45 PM | Report abuse

I hate everything disney.

Posted by: adrienne_najjar | August 31, 2009 1:28 PM | Report abuse

Great. Now my favorite Comic Book company will be owned by the Mickey Mouse corporation?

There goes the good ideas and independence of writers and artist, and the return of the "Comics Code" to sanitize good publishing.

Posted by: wlockhar | August 31, 2009 1:31 PM | Report abuse

DRPinDC is on point... I wondered the same...What happens to Universal's Island of Adventure licensing agreement... this should be fun....

Posted by: KCBinDC | August 31, 2009 2:18 PM | Report abuse

additionally, in the comic book world I guess mickey will partner w/ spidey to fight evil doers and save the world..... or better yet, the fantastic four vs. mickey, donald, pluto and minnie in a death match for superhero supremecy....

can't wait the see that on the big screen in CGI and w/3D....

Posted by: KCBinDC | August 31, 2009 2:22 PM | Report abuse

Wait, Marvel comics still exists? I thought that company died when the last issue of the "Civil War" was written. Sorry folks, Marvel lost creativity long before this new venture. It futher distanced itself from creativity with the Spider-Man III, The Fantastic Four, and Wolverine movies (I purposely left off X-Men III as I still can't believe any studio let the public see that mess). I used to say "...make mine Marvel"; however, that was a long time ago.

Posted by: DWoods1977 | August 31, 2009 2:32 PM | Report abuse

One interesting thing that might come out of this: The return of the CrossGen line of comics. Disney bought the rights to their characters when CrossGen went under and has published reprints of some of the titles. But Marvel and Disney have such different corporate cultures, I'm basically expecting a train wreck (beautifully illustrated by Paul Pelletier or Greg Land).

Posted by: xaxton | August 31, 2009 2:39 PM | Report abuse

I'll tell you what it means: Miley Cyrus will play the part of WonderWoman in the movie version.

Posted by: forgetthis | August 31, 2009 2:46 PM | Report abuse

I'm reading this and Bambi shows up on the lawn. We keep getting more deer out here. It has been a big adventure today.

Posted by: Dermitt | August 31, 2009 4:12 PM | Report abuse

The comments to this entry are closed.

 
 
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