In a move that surprised a lot of people, Comcast has put in a hostile bid for the entire Walt Disney Corporation, appealing to shareholders suffering from “Eisner fatigue”.
Things have been troubled at Disney for a while – Roy Disney recently resigned after describing the company as “soulless” (copy of the resignation letter here.), they have not had a decent traditional animation hit in years, and the parks were suffering even before 9/11. In all, Disney has a net debt of some US$11bn.
Comcast on the other hand, have been doing quite well for themselves. They have more than 21 million subscribers, out of the 40 million homes they pass, and their operating cash flow was over US$2bn in 2003. Amongst the other assets they own they have ten local TV stations, the ABC Television Network and 72 radio stations. Acquiring Disney will give them vast, high-quality content production facilities – giving them control over the whole commission/produce/broadcast chain. We think they will ditch the theme parks fairly quickly as they seem less relevant to Comcast’s plans.
The US$66bn bid (let us just write that out in longhand for you: US$66,000,000,000.00) is ambitious, and there will be obvious comparisons with the ill-fated AOL/Time Warner merger, but if the deal goes ahead it will be interesting to see what kind of company it will create.
Steve Burke, President of Comcast Cable says in their press release: “I know Disney’s businesses very well, and I am confident that when we put those great brands and programming assets together with our distribution, there will be significant opportunities to produce compelling returns for shareholders.”
Rupert Murdoch has already said that the deal would make the company a competitor to NewsCorp., but who else might step forward with a bid?
Comcast estimate that the market capitalisation of the combined company would be around US$122bn, with revenues of US$45bn, and an EBITDA of US$10bn. Accountants are said to be stockpiling hoards of zeros in case there is a worldwide shortage after the deal.
