The Walt Disney Company is no stranger to acquisitions.
In fact, between Marvel, Pixar, Star Wars and Fox, the idea of Disney buying up company
after company has become a bit of a running joke over the last decade.
However, it was wasn’t too long ago that it was Disney themselves who were at risk
of being purchased.
It wouldn’t be the first time Disney was at risk of a takeover.
The main reason Michael Eisner became CEO of The Walt Disney Company in the early 1980s
was because it was an effort to ward off a hostile takeover that was the result of over
a decade of financial stagnation.
Eisner was put into place to revitalize the company and raise their stock price so that
it would become harder for raiders to step in and buy them up, and that’s just what he did.
Between the explosive growth of the theme parks, the Disney renaissance in animation,
the broader horizons at the box office with live action subsidiaries, and new ventures
like retail stores and a cruise line, they were experiencing what was known as The Disney Decade.
Over nearly 20 years they went from struggling to ward off raiders to being a multimedia giant.
However, that wouldn’t last forever.
Many felt that Eisner lost his touch and started to steer the company in a poor direction.
By the early aughts the theme parks were starting to slow down, their animated features were
underperforming, their network ABC was struggling to keep up, and those once new ventures like
The Disney Store were starting to shrink.
It was going poorly enough that Walt’s nephew, Roy E Disney, had begun a public campaign
to get Eisner removed as CEO.
It was at that moment that the telecommunications conglomerate, Comcast, decided to strike.
Similar to Disney, Comcast had spent the past few decades steadily growing in an attempt
to keep up with the other growing media networks at the time.
They had acquired a number of cable-television providers, established channels like QVC,
bought internet service providers like AT&T Broadband, and like Disney, even dipped their
toes into the world of sports by buying controlling stake in the Flyers and 76ers.
This time however they set their sights on Disney, the mother of all acquisitions.
They wanted the offer to be friendly, so in early February of 2004 Comcast chairman and
CEO Brian Roberts called Eisner to personally present the offer of merging the two companies
together.
According to Roberts, the call lasted only minutes and Eisner rejected the idea so quickly
that he wasn’t even able to bring up the price.
So a couple of days later, Comcast went over Eisner’s head and made a public unsolicited
offer to the shareholders of The Walt Disney Company.
Comcast offered an all-stock deal in which Disney shareholders would receive .78 shares
of Comcast for every 1 share of Disney they owned.
This was bad for Eisner.
Already fighting a public battle against Roy Disney, the takeover bid only served to highlight
the criticisms against him as CEO.
The very fact that Comcast was in a position to make the bid to begin with showed shareholders
the vulnerable position Eisner had put the company in.
On top of that the news of how Eisner had quickly rejected the initial offer without
even hearing out a price or taking it to the board served as another example of how Eisner
was treating the Disney company like he owned it.
He did effectively have control of the board, by the way, which is partially why on February
16th Disney formally rejected the public offer.
That didn’t put them in the clear though.
Comcast could still up their offer, and with the right shareholder voting, it could end
up out of Eisner’s hands.
As far as the public went, many were against the idea of the acquisition.
There was the general concern over what it would do to the industry for such a mega-merger
to occur.
It’s not unlike the same concerns we’re hearing today with the potential acquisition
of 20th Century Fox by Disney themselves.
Beyond that, a lot of Florida locals were concerned with what such an acquisition would
mean for the region.
Disney was employing over 50,000 cast members in Central Florida, and while most felt their
jobs would be safe, acquisitions usually mean change, and change is scary.
Lastly, and perhaps most uniquely, a lot of people just felt that the idea as a whole
was wrong.
For as much as The Walt Disney Company had grown over the years, it was still considered
this classic American staple, and the idea of it being owned by a parent corporation
just didn’t sit right with many people.
It also didn’t help that Comcast had, and still has, a pretty awful reputation.
Had a more beloved company made the offer it perhaps would have been received better,
but beloved is definitely not a word associated with Comcast.
So what happened?
Well beyond the general public opposition to the bid, Disney would have luck on their side.
It would just so happen that the day Comcast would make their offer would also be the day
that Disney would release their Q1 earnings reports.
Thanks in part to the massive success of both Finding Nemo and Pirates of the Caribbean,
Disney reported a 19% increase in revenue.
Now typically when one company announces an offer to buy another, it’s not uncommon
to see the share price of the purchaser drop a little, and the share price of the target
company go up a little.
However between all the public resistance to the idea and Disney’s better-than-usual
performance that quarter, the gap was wider than usual.
This was a problem for Comcast because like I mentioned earlier, their offer was an all-stock offer.
The share changes resulted in the value of the offer dropping from 51 billion dollars
to 48 billion dollars in just two days.
Comcast, oddly, decided to keep their offers as-is and refused and raise it.
They argued that it was a fair price for The Walt Disney Company.
Meanwhile, public resistance to the acquisition continued.
Diane Disney Miller, Walt Disney’s daughter, wrote a letter to Disney’s board to voice
her opposition to the deal.
She said that Disney is “a company full of talented, creative people who value being
a part of the business that my father and uncle built.
It is a company that deserves to stand alone, to remain independent, as it has always been.”
For the following month, neither side made a move.
Comcast figured that since no other media company was currently in a position to buy
Disney, they didn’t have to worry about keeping their bid competitive.
However Comcast did point out that they wouldn’t leave the offer on the table forever.
Meanwhile, Disney shareholders also didn’t make any moves, as the situation wasn’t
giving them any new reasons to consider the takeover.
Comcast wasn’t budging on the price and they still weren’t exactly primed to dive
into the world of theme parks, which was a massive part of Disney’s business.
So on April 28th, whether it was the lack of enthusiasm from Disney shareholders, or
Comcast shareholders, or the public, or the general idea that the offer was too low, or
a combination of all of the above, Comcast formally withdrew their bid to purchase The
Walt Disney Company.
Disney was in the clear for now, but the entire episode served as a highlight of where Eisner’s
leadership decisions had lead the company, which would eventually end with his ousting
just a year later in 2005.
A great topic for another video.
The three month ordeal was a sobering reminder that even after the decades of growth and
expansion at The Walt Disney Company, there was still always a bigger fish out there potentially
ready to eat them up.