Comcast Launches Hostile Bid for Disney
By John M. Higgins -- Broadcasting & Cable, 2/11/2004 1:12:00 PM
Declaring that they can run Walt Disney Co. better than current management, Comcast executives went hostile, announcing a $66 billion bid to take over the entertainment giant.
The move is a favorite of Comcast’s which used a similar "bear hug" to force AT&T to auction off its cable systems two years ago. Comcast was the victor in that auction.
Comcast CEO Brian Roberts and cable division President Steve Burke said that between their company’s management strengths and mix of cable system and network assets, they see ways to create more than $1 billion in efficiencies out of the combined operations.
"We are very respectful and mindful of the incredible brand and the institution that is Walt Disney Co.," Roberts said, adding, "This combination would create one of the world’s premier entertainment and distribution companies, and attempt to restore the Disney brand name to its prominence."
Burke said that to make sense of Comcast’s proposal, "the place to start is by looking at how the two companies, if they are put together, are going to be stronger and more profitable and more successful than if they were kept apart."
He was especially critical of ABC, "a weak number four," and noted that the network and its station group make little money "despite the fact that CBS, Fox and NBC make between $800 million and $1.3 billion a year."
The offer followed Robert’s appeal on Monday to embattled Disney CEO Michael Eisner about starting friendly merger talks. But Eisner rejected Roberts’ request.
Eisner said practically nothing about the unsolicited offer. "The board met this morning asked management and the companies advisers for an in-depth analysis of the proposal to enable the board to respond appropriately," Eisner said at a conference for Disney investors in Orlando, Fla., Wednesday.
Disney’s share price jumped 14% on the news to $27.60, while Comcast’s fell 9% to $30.10 per share.
Eisner has come under fire from several critics of late. Roy Disney, nephew of the entertainment empire’s founder Walt Disney, has been an outspoken critic of the Disney CEO after being forced to leave the board last year. Roy Disney and ally Stanley Gold, also a former board member, have recently called for the board to oust Eisner.
Eisner and Disney have also been hurt by the failure to renew its contract with Pixar, the animation studio responsible for hit movies Finding Nemo and Toy Story. Pixar chief Steve Jobs joined the parade of Eisner critics last week.
The proposed deal does not appear to dramatically threatened by federal regulations, but is sure to fuel the already-raging debate over the concentration of media ownership.
"Everybody is so concerned about us owning a few more television stations, but nothing is wrong for two $60 billion companies to combine," said Viacom President Mel Karmazin.
Still, he said yesterday, "I don’t see any reason at all why the government should stop the merger." Karmazin said. "It just shows the value of content that even the people who own distribution feel they need to own content."
Two key Senate anti-trust subcommittee members said the merger "may lead to yet another troubling change in our media landscape," still more consolidation, and possibly "pose a risk to competition in the marketplace of ideas. Subcommittee Chairman Sen. Mike Dewine (R-Ohio) and Sen. Herb Kohl (D-Wis.) vowed in a statement to "examine it very carefully."
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