Did you know that at one point in 1984, Roy E. Disney was considering a takeover of the
Disney company that included selling off some of the theme parks?
I’ll admit, that’s a pretty melodramatic statement, but it is true.
In early 1984 Disney was facing a potential hostile takeover by a corporate raider,
and of the many options considered by both Disney and Roy, one of them included Roy buying
the company himself and selling parts of it off.
This is Saul P. Steinberg.
He was a corporate raider.
What he and many other raiders in the 1980s did was sell junk bonds from their companies.
They were essentially loans that had a high risk of defaulting, but a high interest rate.
They’d use these junk bonds to raise money in the short term, and then use that money
to buyout other companies.
Then they would use the profits of the newly owned company to pay off those loans.
Disney at that time made for a really appealing target.
It was a company with a lot of value in its properties and assets, including three theme
parks and a beloved film library that spanned nearly 50 years.
Yet at the same time the failings of its current leadership meant that it wasn’t trading
that well.
The value was there, but Disney wasn’t doing enough with it.
Steinberg decided he would be the one to do something with it, even if that something
was breaking it apart and selling it off piecemeal.
So he began to put a takeover in motion.
Now it’s important to note that a hostile takeover like this isn’t something that
happens overnight.
It takes time, and the process typically starts with the raider buying up a large amount of
the company’s stock.
So when a takeover is happening, the company is aware and usually has time to try and strategize
a defense.
When Disney learned that Steinberg’s company, Reliance Insurance, was buying up their stock,
they had to act fast and figure out what to do.
While they didn’t know what would work and what would backfire, the options Disney had
were numerous.
One option included offering to buy back the Disney stock from Steinberg at a higher price.
This practice was called greenmail, and it was less than ideal because paying greenmail
usually meant another raider would come right around the corner to do the same thing.
Another option would be to, as odd as it sounds, buy another company.
Spending a considerable amount of money on an acquisition of their own would not only
saddle them with debt, but it would dilute the value of Disney’s stock as well.
In general, it would make Disney a less appealing target.
The problem there was… well, it’d saddle them with debt and dilute their stock.
Disney opted to give this method a shot.
In May of 1984 Disney would issue $200 million in new stock in order to buy the Arvida Corporation
from the Bass Brothers of Texas.
To the public this was done because Arvida was a company in the business of developing
resorts and owned 20,000 acres of land across Florida, Georgia and California.
Internally it was a clear attempt at slowing down Steinberg, and it was a waste of money.
Disney already knew how to develop resorts, and most of the 27,000 acres they already
owned in Florida was still unused.
They didn’t need the company and they didn’t need it’s land.
Worst of all, it didn’t stop Steinberg.
There was a third option, and that was to take the public company private again by buying it.
Disney management consider this as well, but as they did, someone else was considering it.
Roy E Disney at this point was no longer a part of the Disney Company.
He had resigned from his position years prior.
Roy felt that the company wasn’t evolving creatively anymore, and instead opted to just
sit on the Disney board.
Later, in March of 1984 Roy would resign from that position as well.
This time it was to clear himself from any potential conflict of interest as he and his
firm, Shamrock Holdings, prepared to act against Disney in order to unseat it’s leadership
and right a ship that he had felt sailed astray years ago.
Shamrock hired an independent company to conduct a study on Disney to find out how much it
was worth, and how much it would cost to buy.
What they found was that it would cost Roy over $2 billion to buy Walt Disney Productions.
He would essentially have to borrow the money from outside investors, use it to buy the
company, and then turn around and sell parts of the company to pay back that loan.
To him it was a simple choice.
If he had to sell off a part of the company it would be the theme parks.
Growing up with his Uncle Walt’s movies and working in animation and film himself,
he saw Disney as a film studio first and foremost.
It wasn’t ideal that he would have to sell part of the company, but he felt all things
considered, he’d rather save part of the company than none of it.
So he went ahead and started to have investors lined up for the massive loan he would need
to take over Disney.
With all of the planning coming together, Roy would later learn that he would need to
put $200 million of his own money up to buy Walt Disney Productions and he would have
to sell one of the two resorts to pay back the loan of over $2 billion.
In theory he was ready to carve out a piece of the company to save the rest, but when
the time came he couldn’t bring himself to do it.
He couldn’t cannibalize what his family worked so hard to build.
Ultimately Shamrock Holdings would pass on the decision.
So what did happen?
Well long story short, Disney’s board ultimately decided to pay greenmail to Steinberg in return
for the 4.2 million shares he owned.
The greenmail would cost Disney over $325 million and it was approved under the condition
that Disney would make moves to improve their overall value to prevent other raiders from
trying to extort greenmail from them later down the line.
Roy was asked back onto the board of directors and helped kick off a drastic shift in leadership.
Remember that company Arvida that Disney bought?
Well the Bass brothers would ultimately increase their stake in Disney up to 25%, which scared
off other raiders They would also back his fight to have CEO Ron Miller ousted and replaced
with new management.
Under his suggestion and their support, the board approved the hiring of Frank Wells as
President of the company and Michael Eisner as Chairman and CEO.
So luckily in the end, Roy didn’t have to take over his uncle’s company or sell parts
of it off.
But for that short time, amongst all the “what ifs” and “maybes”, there was a possible
future where a Disney would have owned Disney, but not Disneyland.
If you want to learn more about the tumultuous period in which Disney was almost taken over,
I highly suggest checking out Storming the Magic Kingdom by John Taylor.
You can find a link to it in the description below.
Thank you all for watching and have a great week!