Disney buys Muppets as bid prospect fades

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The Independent Online

Walt Disney unveiled plans to buy the Muppets characters yesterday, sealing a deal it has been pursuing for more than a decade, as the US media giant dismissed an unsolicited takeover offer from Comcast.

The US cable group's hostile bid was looking increasingly troubled last night after Disney's board rejected the offer and unanimously backed the company's chief executive, Michael Eisner.

Sources close to Comcast were quoted as saying the cable company was not interested in raising its bid for Disney to match the current stock price. The move dampened expectations Comcast may significantly raise its all-share $48.8bn bid for Disney, and prompted a 3 per cent rise in Comcast stock, which fell 12 per cent in the three days after it launched its bid.Comcast is understood to be also holding back from an additional tactic that would involve petitioning the upcoming annual meeting to replace all or part of Disney's board.

Disney rejected Comcast's unsolicited offer on Monday night, noting the bid represented a 15 per cent discount to its latest stock price. Comcast responded by saying the bid was a full and generous offer. Comcast's all-stock offer for Disney was initially valued at $26.47 a share when it was launched last Wednesday, but the value has declined as Comcast's share price fell.

On current stock prices, the bid values Disney at almost $24 a share. Disney shares closed two cents lower at $26.90 on Wall Street yesterday.

Comcast pounced on Disney during a campaign by its former directors to unseat Mr Eisner. It has made much of the weakness of Disney's management since its takeover approach.

Analysts said a bid worth $30 to $35 a share was probably needed and questioned whether this made financial sense for Comcast. Paul Kim, an analyst at Traditional Asiel Securities, said: "We believe that Comcast overestimated its own position with the investment community and underestimated the political strength of Disney's management and board. We believe that the timing of the Disney bid was based more on perceptual analysis than financial analysis."

The Disney board noted that Comcast's offer was below its share price from the start. The board said it would not accept any bid "that does not reflect fully Disney's intrinsic value and earnings prospects".

Disney's profits are expected to rise sharply this year as it nears the peak of its earnings cycle, on the back of successful film releases. It did not disclose the price it is paying for the Muppets characters, which it originally attempted to buy in 1990 shortly before the death of their creator, Jim Henson. The Muppets were instead bought for $680m in 2000 by the German media company EM.TV, which sold them back to Henson's family for $89m last year. Disney said it planned to develop movies and TV shows with the characters.

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