The Disney board said Comcast's proposal to swap 0.78 of a Comcast share for each Disney share was insufficient, particularly since Disney's stock has risen after Comcast went public with its unsolicited bid on Feb. 11.
"The interests of Disney shareholders, which represent the fundamental priority of the board, would not be served by accepting any acquisition proposal that does not reflect fully Disney's intrinsic value and earnings prospects," the board said in a statement released Monday.
The board said Comcast's proposal undervalued the company by at least $6.6 billion, based on the closing stock prices of both companies the day after Comcast announced its bid. In its statement, the board did not address a key provision in Comcast's proposal to assume $11.9 billion in Disney debt.
In rejecting Comcast's proposal, however, the Disney board did leave open the possibility it would consider other offers that create shareholder value.
"We are committed to creating shareholder value now and in the future and will carefully consider any legitimate proposal that would accomplish that objective," the board said.
The board also restated its confidence in Disney chief executive Michael Eisner, saying the company's current structure and strategy maximize shareholder value.
"The board has confidence in the business, financial and creative direction of Disney under the leadership of Michael Eisner and his management team," the press statement said.
The board's validation comes at a critical time for Eisner, who has received intense criticism from former board members Roy Disney, a nephew of the company's founder, and Stanley Gold, who both accuse Eisner of ruining the company. Furthermore, Eisner faces pressure from some institutional investors for the recent dissolution of Disney's lucrative relationship with Pixar Animation Studios.
But Eisner himself defended Disney's performance last week at a meeting with securities analysts in Orlando, Fla., pointing to the company's strong first-quarter financial results.
For its part, Comcast has not indicated whether it would raise its offer for Disney, but said in a press statement: "We maintain the belief that our merger proposal represents a sound and compelling proposition for both sets of shareholders."
Comcast defended its assessment of Disney's value, saying, "Our proposal to acquire the Walt Disney Co. reflects a full and generous valuation based upon Disney's prospects and performance over a long period of time, representing a significant premium over Disney's share price before the bid during the last three years."
The television cable giant could now pull the bid off the table entirely or take its offer directly to Disney shareholders in an attempt to win a majority vote of approval.
Even before Comcast's bid, the annual shareholders meeting, scheduled for March 3 in Philadelphia, was expected to be a contentious event. Roy Disney and Stanley Gold have been campaigning shareholders to withhold their vote for Eisner and three other directors, who are up for reelection at the meeting. Disney investors, then, are likely to be lobbied from all sides.