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