Incredibles

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 . . .

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click for larger graphic

Pixdis0601_wsj_2

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
http://www.nytimes.com/2006/01/20/business/media/20pixar.html

 

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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.
Daniel Gross
Slate, Wednesday, Jan. 25, 2006, at 6:13 PM ET
http://www.slate.com/id/2134852

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Sources:
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
http://online.wsj.com/article/SB113764205313450605.html

Is Disney/Pixar the sequel to Apple/NeXT ?                         
http://bigpicture.typepad.com/comments/2004/01/pixar_to_disney.html

Jobs to become Heir Apparent at Disney?                        
http://bigpicture.typepad.com/comments/2003/12/jobs_to_become_.html

UPDATE:  January 20, 2006 9:46am>

Nice couple of charts from WSJ:

Pixar_disney_20060119210307


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.

* * *

Lion_king_disney_20060119212013
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

Source:
Analysts React to Disney-Pixar Talks
January 19, 2006 12:18 p.m.
Compiled by Worth Civils
http://online.wsj.com/article/SB113768923033850965.html 

Category: Film, Finance, Financial Press

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4 Responses to “Will Disney Buy Pixar? Will Jobs Become Heir Apparent?”

  1. Andrew says:

    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.

  2. royce says:

    Is it a good thing to have a hardware maker involved with a content provider? The Pixar library isn’t big, but Disney is sitting on top of gold. Seems like the decline of Sony came when they bought music and stopped their clever engineers from thinking up new ways to piss off content companies.

  3. anon says:

    Jobs may be like a Gates of Disney… not a CEO (Balmer) but almost equal in stature. I am very not sure on this.

    This would give Disney checks-and-balances on governance. There might be a CEO (Iger) and Jobs (Chief Architect and Creative Officer)

    Disney still owns an incredibly valuable film library and has traditional distribution that Apple and Pixar do not have. Jobs does not have tons of experience with many parts of Disney. There also may be a little bit of a tradeoff between creativity and managing. Also, disney is a different ball game than smaller start-ups. Success at smaller start-ups does not necessarily transfer to big, traditional company.

  4. Jon H says:

    I think Jobs would be Chairman of Disney, and Iger would be CEO.

    That’d let Iger keep doing the more hands-on work, while Jobs could hang in the background.

    I’m guessing that Jobs’ stature in the industry, his diva nature, his major stock holdings, and his money would pretty much guarantee Jobs would get whatever position he wants. His bargaining position would be far stronger wrt Disney than it was with Apple during the NeXT acquisition.