Will Disney Buy Pixar? Will Jobs Become Heir Apparent?
Today's WSJ has a major, front page scoop: Disney is in advanced talks to buy Pixar:
"Walt Disney Co. is in serious discussions to buy Pixar Animation Studios after months in which the two animation giants have been exploring ways to continue their lucrative partnership, according to people familiar with the matter.
In the deal under discussion, Disney would pay a nominal premium to Pixar's current market value of $6.7 billion in a stock transaction that would make Pixar Chairman and Chief Executive Officer Steve Jobs the largest individual shareholder in Disney, according to people familiar with the situation. That would vault Mr. Jobs into an even more influential place in the media world, where he already holds tremendous sway as head of Apple Computer Inc. Yesterday, Apple reported that net income nearly doubled in the latest quarter on huge demand for its iPod music players. (See related article.)
People familiar with the situation caution that the talks are at a sensitive stage and that the outcome isn't certain, noting that other options are possible."
Disney needs some sort of deal to guarantee its future stream of animated films. Whether the best structure is a takeover or some other relationship is subject to debate.
What is especially curious about a Disney takeover of Pixar will be the potential role of Jobs in Disney. Disney CEO Robert Iger is 55, Jobs is 4 years his junior -- might there be succession issues?
Recall that when Apple bought NeXT, they got Steve Jobs as a consultant. From that role, he eventually engineered his return as CEO. Will a Disney/Pixar deal give Jobs a springboard to eventually takeover running Disney?
I wonder if we will see history repeat itself . . .
click for larger graphic
Chart courtesy of WSJ
UPDATE: January 20, 2006 5:56am
The NYT weighs in:
"And the merger could give Mr. Jobs a pivotal role, if he wants one, in helping shape the convergence of new media and old at Disney. "He's one of the handful of people who has shown the ability to guide both technology and entertainment companies and that might be quite useful to Disney," said Bran Ferren, a former Disney Studios Designer and technologist, who is now co-chairman of Applied Minds, a technology consulting firm based in Glendale, Calif. "What he has that is rare is taste, and that's a very valuable commodity if you can focus it and harness it."
Deal Could Offer New Disney Role for Apple Chief
By LAURA M. HOLSON and JOHN MARKOFF
Published: January 20, 2006
UPDATE: January 26, 2006 3:31pm
Slate joins team "Jobs as heir apparent at Disney"
Robert Iger vs. Steve Jobs
Only one man can control Disney. I know who I'm betting on.
Slate, Wednesday, Jan. 25, 2006, at 6:13 PM ET
Walt Disney Is In Serious Talks To Acquire Pixar
Stock Deal for Animator Would Make Jobs Top Holder Of Entertainment Giant
MERISSA MARR and NICK WINGFIELD
THE WALL STREET JOURNAL, January 19, 2006; Page A1
Is Disney/Pixar the sequel to Apple/NeXT ?
Jobs to become Heir Apparent at Disney?
UPDATE: January 20, 2006 9:46am>
Nice couple of charts from WSJ:
Wall Street was of a mixed mind about the "serious talks"
between Walt Disney and Pixar Animation Studios. Most thought a
deal would be good for Disney, but some questioned what Pixar would gain.
* * *
I'm certainly not discounting it, not saying it's impossible. I very much believe Disney would want it. I just continue to question what's in it for Pixar. There's no advantage for Pixar and the corporate culture is too different. There is flight risk of key personnel [from Pixar if it is bought by Disney]. I just don't see this as really a positive for Pixar, and question it from that perspective.
-- Soleil Research analyst Marla S. Backer, who has a "hold" rating and $50 price target on Pixar, in an interview
* * *
With Disney reportedly paying a slight premium (and probably lower than what the market was thinking), we think shares trade softly on the acquisition news, since a Pixar acquisition has been in the share price to some extent.
-- Raymond Lee Katz at Bear Stearns, who rates Disney at "peer perform" with a year-end price target of $32, in a research note
* * *
Strategically, we think the deal would make sense since Disney views animation as a key core competency and vital to its future. We believe Pixar's track record suggests that it has arguably become the preeminent name in animation. … One of the keys to a successful acquisition … will be to preserve Pixar's creatively focused, independent culture within the larger parent company. We are optimistic that Pixar's corporate culture could in fact be maintained, given Disney's prior success with Miramax and ESPN, two companies with strong independent cultures.
--Prudential's Katherine Styponias, who has an "overweight" rating and $34 price target on Disney, in a note
* * *
The news isn't a surprise to us, with talks on a new distribution deal past the year-end 2005 target. We think Pixar's success streak has established it as the leading force in the genre; we see a sizable takeover premium against a relatively small library. We are also wary of negative investor reaction on the possible outcome of talks.
-- Standard & Poor's equity analyst Tuna Amobi, who cut Pixar to "hold" from "buy," while maintaining his price target of $65, in a statement
* * *
We wouldn't expect to see much more upside in Pixar shares, and believe the stock is now pushing limits at current levels as expectations are already "priced in". … A deal of this magnitude would be dilutive to Disney's earnings, but would also ensure that Disney maintains its preeminent role in animation. But, we believe this could also be maintained with a new distribution deal, and still wouldn't rule out a more lucrative distribution deal for Pixar. We believe this morning's news bodes well for both DreamWorks Animation and Lions Gate. As the only two remaining publicly traded studios, we believe interest in the two from larger media conglomerates could heat up.
-- Jefferies analyst Robert Routh, who maintained his "hold" rating and $52 price target on Pixar, in a note
Analysts React to Disney-Pixar Talks
January 19, 2006 12:18 p.m.
Compiled by Worth Civils
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Then there's the follow-on question: what would this all mean for Apple? There's no doubt that Jobs' having increased influence via Disney would be good for Apple. But if his Disney gig starts taking up too much time, that could hurt. Jobs has been able to juggle both Apple and Pixar effectively, but I assume that's because Pixar doesn't take a huge amount of his time. Moving into big chair at Disney would be a very different matter.
Posted by: Andrew | Jan 19, 2006 10:18:19 AM
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