The surprise proposal to purchase Disney, the media and theme park titan, was enclosed in a letter sent by Comcast President and CEO Brian L. Roberts to Disney Chairman Michael Eisner. Comcast made the letter public this morning.
In the letter, Roberts said he spoke with Eisner earlier this week about a merger of the two companies, but was rebuffed.
"It is unfortunate that you are not willing to do so," Roberts wrote to Eisner. "Given this, the only way for us to proceed is to make a public proposal directly to you and your board."
Under the offer, Comcast would trade $54 billion in stock for a majority interest in the new company. Comcast would also assume Disney's $11.9 billion in debt, the Associated Press reported.
Comcast's stunning proposal was made as Eisner is fending off criticism from former board members Roy E. Disney, the nephew of Disney founder Walt Disney, and Stanley P. Gold about his performance and lack of a succession plan as Disney's chief executive.
It also comes as Wall Street analysts who track the company and major institutional investors gather in Orlando today for an investor conference. Disney had been expected to release its fiscal first quarter earnings this afternoon. Facing the takeover bid the company released its results this morning instead.
Disney reported a sharp rise in quarterly earnings. Net income was $688 million, or 33 cents per share, in the fiscal first quarter ended in December, compared with $36 million, or 2 cents per share, in the year-ago quarter.
"This is a very exciting moment," Comcast CEO Brian Roberts said in a conference call with investors and analysts. Roberts said 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.
Calls to Disney representatives Zenia Mucha, Michelle Bergman and John Spelich were not immediately returned early Wednesday. Michael Citrick, spokesman for Disney and Gold, said they had no immediate comment.
Paul Kim, senior media analyst at Tradition Asiel Securities, said that while Roberts making a bid for Disney in and of itself is not surprising, the timing is.
"It's going for the jugular," he said. "He is using this vulnerable time to force Disney's hand."
Kim also said Comcast is basically a cable company, and might be biting off more than it can chew. "I think they underestimate the complexity of being a broad-based media company," he said.
Under the merger, Comcast said it would issue 0.78 of a share of its stock for each Disney share, and Disney shareholders would retain 42 percent of the combined company.
The deal values each Disney share at $25.69, a 7 percent premium over their closing price Tuesday, or more than $5 billion total. Comcast shares ended trading Tuesday at $32.94; Disney shares finished at $24.08.
Philadelphia-based Comcast merged with AT&T Broadband in November 2002, and the company noted that merger in its sales pitch Wednesday.
"Our management team has a proven track record of successful integration of our merger partners," Roberts said.
Comcast has more than 21 million total cable television subscribers in 35 states and Washington, D.C. In October, the company reported net income of $3.18 billion and stronger-than-expected demand for premium services including high-speed Internet access. It has not yet released its results for the most recent quarter.
Sean Mussenden can be reached at firstname.lastname@example.org or 407-420-5664. Wire services were used in this report.
Copyright © 2004, Orlando Sentinel
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