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Monday, 31 August 2009

Disney To Buy Marvel Enterprises For $4 Billion

The Walt Disney Co. (DIS) said Monday it agreed to buy Marvel Entertainment Inc. (MVL), the creator of Spider-Man, the X-Men and thousands of other characters, for about $4 billion in the company's largest acquisition since it bought Pixar Animation Studios in 2006.

The deal opens a new chapter in Disney's long history, adding a slew of new, globally recognized movie characters - such as Iron Man, Spider-Man, X-Men, Captain America, Fantastic Four and Thor - to its deep bench of classic and contemporary icons. It also adds countless lesser-known storylines and characters that Disney hopes to introduce to the world.

The deal marks the first big media deal since companies began hoarding cash last fall during the global financial crisis. Aside from the economic downturn, Disney's move amounts to a rare display of confidence in an industry that's muddling though a daunting transition to digital media amid growing doubts about its traditional business models.

Disney Chief Executive Robert Iger said during a conference call Monday that Marvel was an attractive target for Disney despite the challenges facing the media industry, such as the decline of DVD sales, that has hurt profitability at major film studios.

"They're not bulletproof. They are not immune from the changes that we're seeing, but they have established a footing that we think is more solid than what you typically see in the nonbranded non-character driven movie," said Iger.

Disney shares were down 3.9% at $25.80 while Marvel shares jumped 25% to $ 48.32. Shares of DreamWorks Animation SKG Inc. (DWA) were up 5% to $33.25 on the prospect of more acquisitions in media and entertainment.

"This is another sign that confidence is returning to the marketplace," said Miller Tabak analyst David Joyce.

The Disney-Marvel marriage fits with the strategy du jour for major media conglomerates such as Disney and Time Warner Inc. (TWX) of driving revenue from popular content over time across the globe and multiple technology and entertainment platforms.

Disney has a unique array of businesses to execute the strategy with its global sales and distribution infrastructure, its theme parks, its video game and merchandising businesses and its cable and broadcast TV networks. For its part, Marvel is a particularly attractive target for the company given its appeal to younger male audiences, while Disney has shown outsized strength with females through properties like Hannah Montana and the Jonas Brothers.

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