Comcast Corp. Wednesday launched a surprise all-stock offer to buy Walt Disney Co. for about $54.1-billion (U.S.), touting the hostile bid as a chance to create a "unique" world-leading entertainment and communications company after talks an the executive level failed to unite the two.
The bid -- which would see Philadelphia-based Comcast exchange 0.78 of a Comcast class A share for each Disney share -- comes just days after Disney's top executive rebuffed suggestions to that the two enter merger talks.
"It is unfortunate that you are not willing" to enter discussions, Comcast president and chief executive Brian Roberts said in a letter dated Feb. 11 to Disney CEO Michael Eisner.
"Given this, the only way for us to proceed is to make a public proposal directly to you and your board."
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Disney offered no immediate comment on the offer, saying only that it had received the offer and will "carefully evaluate" the proposal.
"In the meantime, there is no action for shareholders to take," Disney said.
In a statement outlining Wednesday's bid, Comcast, the biggest cable television company in the United States, valued the overall deal at $66-billion, including the assumption of about $11.9-billion in Disney debt.
Comcast's common A shares fell 7.9 per cent to close at $31.23, bringing down the bid price to $49.8-billion.
The bid price offers Disney shareholders a $5-billion premium over Tuesday's closing price of $24.08 in New York. Based on Tuesday's closing prices, the proposal offers a 9.9 per cent premium to Disney shareholders.
Disney shares closed up 14.6 per cent to $27.60. The company also released its first-quarter earnings earlier in the day than originally expected in the face of the takeover bid.
For the fiscal first quarter, Disney reported sharply higher earnings $688-million or 33 cents a share in the fiscal first quarter, compared with $36-million or 2 cents in the same period a year earlier. A total of 24 analysts polled by Thomson Financial/First Call had been looking for earnings of 23 cents a share on average in the most recent quarter. Sales rose to $8.5-billion from $7.17-billion.
'The ball's in Disney's court': Comcast CEO
During a conference call, Mr. Roberts told analysts and investors the combination would create one of the world's premier entertainment and communications companies and "we believe, restore the Disney brand to prominence and the company to growth."
Noting that the offer for Disney had already been rejected by Eisner, an analyst asked Roberts what would come next. "The ball's in Disney's court," Roberts replied, according to Associated Press.
Meanwhile, early analyst comments on Comcast's proposed bid were positive.
"We regard Comcast and Disney as perfect merger partners," Merrill Lynch analyst Jessica Reif Cohen said in a report.
"Comcast's long history of deal execution has been completely extraordinary in terms of shareholder value creation."
If the deal goes through, Disney shareholders would own about 42 per cent of the combined company.
A successful merger would also make Comcast one of the globe's biggest media companies, alongside companies like Time Warner Inc. and News Corp. which combine distribution channels with programming assets.
Disney owns the ABC television network, ESPN and other cable networks, as well as theme parks and the Disney and Miramax movie studios. Comcast has about 21 million cable subscribers.
"This is a unique opportunity for all shareholders of Comcast and Disney to create a new leader of the entertainment and communications industry," Mr. Roberts said.
"Not only would this merger create significant shareholder value, but it would also position the combined company to compete vigorously with other entertainment and communications companies, including newly created integrated distribution/content providers."
In his letter to Mr. Eisner, Mr. Roberts also said the combined company would "take advantage of an extraordinary collection of assets" owned by the two individually.
"Together, we would unite the country's premier cable provider with Disney's leading filmed entertainment, media networks and theme park properties," he said.
Cable, Internet subscribers
"In addition to serving over 21 million cable subscribers, Comcast is also the country's largest high speed Internet service provider with over 5 million subscribers."
Pitching the deal to investors, Comcast also noted that its management boasts a "superior track record," citing the company's successful purchase of AT&T Broadband about 15 months ago. The target in that case, the company said, was about twice the size of Comcast.
"Performance of the merged company has far exceeded initial margin improvement expectations," Comcast said.
"The combination has resulted in immediate reversal of basic subscriber loss and acceleration of system upgrades, as well as significant launches of new products and services such as video-on-demand and (high definition television)."
Wednesday's announcement comes as Mr. Eisner faces increasing opposition from former Disney directors Roy Disney and Stanley Gold, who are lobbying shareholders to force Mr. Eisner out, claiming poor management and a failure to address succession issues. Mr. Disney and Mr. Gold resigned from Disney's board late last year.
Disney's board, meanwhile, fought back this week with a Securities and Exchange Commission filing saying it is now addressing succession matters.
"Comcast is clearly targeting the opportunity created by some recent Disney shareholder unhappiness and Disney's weak stock price performance since 1998," Ms. Reif Cohen noted in the Merrill report on Comcast's proposal.
Still, several analysts also suggested Comcast's bid was also likely just the opening salvo, with a successful offer likely carrying a higher price tag.
"In our view the proposal for Disney is too low," Deutsche Bank Securities Inc. analyst Douglas Mitchelson said.
"Given the surge in many of Disney's businesses...We believe Disney is worth over $30 a share."
