Microsoft trying to buy Disney?

[DVCDAVE]

Who said anything about hostile ? Second a 25% premium is 46 Billion X 1.25 = 57.5 billion, not 67 billion. Further, companies are taken over all the time nowhere near the 52 week high, and Disney, being cash strapped is in no postion to dictate anything, let alone their price. If they were so cash rich, they wouldn't have sufferred a downgrade in credit rating, AND they would have been buying up their own stock when is was down below $20. Right now they are in a bad industry with an empty checkbook and very vunerable.

 

[Another Voice]

I guess the ad line “Where do you want to go today?” might finally have an answer.

There is no reason why any takeover deal has to be hostile. Money can be a powerful inducement to many people, and Disney has built a substantial legacy of buying off executives and board members.

Many people in the media industry consider Disney slightly overvalued at this point. There is no sign of a turn around for ABC, the growth of ESPN is slowing and the soaring costs of its programming will put a strain on its income potential, issues with the parks and retail, etc. The “premium” for the stock may not be all the much over it’s current price.

The parks division is a rather substantial business on its own with some $7 billion in revenues last year. It would not be a “small fish” in anyone’s pond, even Microsoft. And a different corporate structure could help the parks immensely. The constant complaint you hear is that the parks feel they are simply cash machines for Disney’s troubled divisions. Freed of the leeches and able to run as a business on their own merits, the parks could truly thrive and grow.

The key to what happens is to see who is interested in Disney’s content – movies, television, parks, creative; and who is interested in Disney’s distribution – ABC, cable, ESPN. The interest of those two different businesses are not always the same and do not always have to be connected.


P.S. I don’t find many absolute viewpoints around here. Certainly no one is saying that everything Disney does is all bad, and only a few are claiming that everything Disney does is always good. I think we all agree that Disney can still do an impressive job; the disagreements are over how often Disney tries to it.

 

[fklhou]

DVCDAVE

You forgot to add in the debt. The actual market cap was above $46 billion and a 25% premium plus debt gets you to arround $57 billion.

As to this being hostile or friendly. Disney does not have to do any deals right now. For Eisner to voluntarily sell out where he is the acquired company at a price below 52 week high is not not likely. This would be in effect be the same as Eisner admitting that he screwed up and we all know how likely that is.

Another Voice, I understand that Disney could buy Eisner out but how likely is that given the fact that he controls the board. Again, you would be in effect asking Eisner to admit that he made a mistake.

Bottom line is that this would not be a cheap acquisition for anyone.

 

[YoHo]

But As was commented on in the Disney-Miller thread, Eisner may not have the same control over the board he once did.

 

[mattjs]

And the chatter isn't quieting any...


"SPOUSE FOR MOUSE?........."
http://www.nypost.com/business/38447.htm

 

[Panthius]

I am no fan of Microsoft, but would this be a good thing or a bad thing? Whether or not this is physically possible considring the current state of financial information, I could not tell you, but I am interested to hear peoples opinions on whether they feel this would be better for Disney if they were bought (more or less) by Microsoft. I personally would like to see a change, but I am not sure if I can trust Micro$oft to run Disney well enough for it to gain my support. Either way, I am curious to see whether others feel this would be a good thing for Disney, or a bad thing for Disney (which is scary that I could even consider this being a good thing).

Panthius

 

[YoHo]

I caught that too. I wonder what kind of brain drain that would cause?

 

[DVCDAVE]

I agree with Panthius, However, we have to realize that the ONLY reasons these rumors are around is becuase of the dire straights Ei$ner has put Disney in. Frankly I am sick and tired of these E$ner apologists defending the undefendable. The stock has been in a tail spin well before 9/11 and anyone who bought the stock after 10/1995 has LOST money on their holdings. Yes, that means the stock has been on DECLINE for over the last 6 years of E$iner$' reign. Interesting enough the stock market as a whole has had a great 6 years, and the economy up until recently has been good too. Eisner has had the BEST enviroment to suceed during those six years, and failed miserably. Anyone with any self respect would have long ago retired or resigned, instead, he continues to act as a parasite and milk the shareholders for all they are worth, knowing he stacked the Board and is well protected.

Just the facts

 

[raidermatt]

Disney stock has been in decline for a little less than two years, not six. Someone who bought at around $21 six years ago, could have nearly doubled their money in about 2 years. After some ups and downs, they could have sold for even more two years later, giving them an annual return of over 25%.

Be careful when using stock price as a barometer. It can be twisted in a lot of different ways. If we do use it, then I guess Eisner was doing a great job until less than two years ago.

And for someone who bought a block of Disney stock near the end of September, things aren't looking so bad, as they have made around 25% already.

 

[DVCDAVE]

OR, using your words, if they bought it to years ago they would have lost half their money. My point is that the stock had been hovering around $21 in October 1995, about where it is now, anyone buying it after October 1995 now has a cost basis higher than where the stock is now. In contrast the Dow (which DIS is a compontent) is up more than 35%. Further their credit rating has been downgraded as their debt burden has heavily increased, Disney stores were opening in 1995, they are closing today, the parks are on a reduced operating schedule today compared to 1995, and some hotels are literally deserted today, as none were in 1995. I won't leave out their GRAND entery in to the internet business (GO.COM) and the etoy business, which went completly belly up in less than 2 years. If this is anyones idea of a sucess story, I'd hate to see their idea of a disaster. The only reason these rumors of takeover even exisit speaks volumes of Disney's condition today. I don't have to say much more of their condition, I'll simply direct you to Eisners' own words in his letter in the annual report, in short its pathetic.

 

[Another Voice]

Yes, Eisner still has a lot of friendly faces on the board. But all the shareholder unrest, talk of lawsuits, and the laughter about them coming from Wall Street has really curtailed their power to simply rubberstamp whatever Mike comes up with.

And while he has the board, Michael’s control of the stock has never been weaker. With the Bass Brothers forced to sell and Warren Buffett disposing of all of his shares – Eisner lost the two big blocks that insured his control. The next biggest blocks of stock are controlled by two cousins who aren’t so happy with Michael theses days. And while cousin Roy may not be interested in takeovers to boast his stockholdings as he once was, his cousin Diane is more than interested in helping out. And there are all those institutional investors who, as Mr. DVCDave has pointed out, have lost money in a Dow component in the biggest bull market in history in the middle of the strongest economy of the 20th century. It would be interesting to hear current management justifiy their continued existence to that group.

A hostile takeover will guarantee that Disney is broken up. There simply won’t be any other way to finance it. The insiders know that a takeover is all but inevitable now. The Company is too weak and too poorly positioned for the future. Sad facts, but that’s the truth. It’s better to arrange a forced marriage when you have some say in the proceedings – and that’s what many in Disney have felt for a while.

And as for Apple Computers taking over Disney – Steve Jobs likes to say all kinds of things after eating those “special” brownies. You gotta watch those Northern California types.

 

[Lanshark]

I hope you don't mind Galahad put I posted this over on the Debate board to see everyones thoughts and reactions. One would think noone would mind it too much since Eisner is not exactly well loved but I bet the reception would not be too warm for Mr. Gates either.

 

[Luv2Roam]

Buffet did dump Disney stock a few years back. That said a lot right there.
And as for comparing Six Flags and Disney parks -- how about Paradise Pier? Isn't that Six Flags on a very small scale?
Speaking of Buffet -- In December DH and I were in the concession line at the movie theatre. Guess who was standing next to me? That's the closest I'll get to that kind of $. Now how often do you think you would see Gates or Eisner standing in an AMC popcorn line?

 

[Galahad]

Found this in this week's issue of a computer-geek trade journal:

http://www.eweek.com/article/0,3658,s%3D25060%26a%3D21547,00.asp