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Comcast Makes Unsolicited Bid for Disney

Comcast announced its surprise offer to buy Walt Disney for more than $54 billion in stock and $11.9 billion in Disney debt, for a total value of $66 billion. Under Comcast’s proposal, Disney shareholders would retain a 42 percent stake in the combined company.

Comcast said the combined company would have an “unparalleled distribution platform and an extraordinary portfolio of content assets.”

“This is a unique opportunity for all shareholders of Comcast and Disney to create a new leader of the entertainment and communications industry,” Brian Roberts, Comcast’s president and chief executive officer, said in a statement following the company’s unexpected announcement.

“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,” he said.

Disney owns the Disney and Miramax movie studios, ABC television, ESPN and the Disney theme parks. Philadelphia-based Comcast has 21 million cable customers in 35 states and Washington, D.C., and 7 million Internet broadband customers, half of them acquired when it took over AT&T Broadband 15 months ago.

If successful, the deal would vault Comcast into one of the world’s largest media companies — pitting it against Time Warner Inc., owner of America Online, and News Corp. as a media conglomerate that controls large programming assets with distribution outlets like cable, satellite and high-speed Internet services.

Roberts said Wednesday Comcast decided to publicize its merger offer to Disney shareholders “in light of [Disney Chief Executive Michael] Eisner’s refusal to consider the proposal.”

Comcast also released a letter to Eisner dated Feb. 11 after the Disney head personally rebuffed Roberts’ request to enter negotiations about a friendly merger earlier that week.

Roberts called Eisner’s unwillingness to hold merger talks “unfortunate,” adding, “Given this, the only way for us to proceed is to make a public proposal directly to you and your board.”

Comcast’s bid comes as Eisner faces increasing opposition from former Disney directors Roy Disney, the nephew of company founder Walt Disney, and Stanley Gold. The two are trying to oust Eisner from the top post for his supposed poor performance and operational blunders over the past decade.

Disney has aggressively lobbied Disney shareholders to vote against the reelection of Eisner and three other directors at next month’s shareholders meeting, citing in particular Eisner’s failure to address succession issues. Disney and Gold resigned from Disney’s board late last year.

Eisner and Disney’s board are also defending the company against criticism following Apple and Pixar CEO Steve Jobs’ decision to end talks over renewing a distribution deal between Pixar and Disney. Pixar’s movies, which include animated blockbusters like Finding Nemo and Monsters Inc., have accounted for nearly half of Walt Disney studio’s gross income.

In pitching the deal to investors, Roberts cited the company’s merger with AT&T Broadband in November 2002 as an example of its ability to handle merger transitions.

“Our management team has a proven track record of successful integration of our merger partners,” Roberts said in a conference call Wednesday.

The cable giant also boasted its management included a longtime Disney insider, its current head of cable television operations, Steve Burke, who had been president of ABC Broadcasting before moving to Comcast.

“I know Disney’s businesses very well,” Burke said in a press release. “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.”

Disney representatives on Wednesday had no immediate comment regarding Comcast’s hostile takeover announcement. But, the company did release strong first-quarter earnings, which Disney said highlight its continued economic vitality.

During a conference call Wednesday, Roberts said the combination would “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.

The deal — if approved by Disney shareholders — must be reviewed by the Justice Department or the Federal Communications Commission.

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