Disney Rejects Comcast’s Takeover Bid

The Walt Disney Company has rejected cable and ISP giant Comcast’s hostile takeover bid, which is now valued at around $47 billion. The company’s board of directors called the offer undervalued and also endorsed embattled Disney CEO Michael Eisner.

The rejection, which was widely expected, comes after Comcast offered 0.78 Comcast shares for each Disney share last Wednesday, in a hostile bid initially valued at $66 billion. Comcast also said it would assume some $12 billion in Disney debt. The price on the deal has since fallen after shares of Comcast dipped in the days following the initial bid.

In its rejection notice Monday, Disney said the Comcast offer undervalued the company by at least $6.6 billion based on the closing price of both Comcast and Disney on the day after the hostile takeover was announced.

Disney, however, left the door open to other offers.

“We are committed to creating shareholder value now and in the future and will
carefully consider any legitimate proposal that would accomplish that
objective,” a Disney statement said. “In any proposal by Comcast, or any other
company, the board will consider and assess the value to be received in
exchange for the shares of Disney, and also the appropriate premium to reflect
the full value of Disney.”

Comcast immediately shot back that the merger proposal represents a “sound and
compelling proposition” for both sets of shareholders.

“Our proposal to acquire The Walt Disney Company reflects a full and generous
valuation based upon Disney’s prospects and performance over a long period of
time, representing a significant premium over Disney’s unaffected share price
during any relevant measurement period over the last three years,” Comcast
said in a statement.

Comcast’s options now include dropping the effort, upping the bid or
attempting to take its current offer to stockholders in hopes of convincing
them the Disney board of directors is not acting in the stockholders’ best

The Disney board also threw its support behind the Eisner, who is
facing opposition from former board member Roy Disney, nephew of company
founder Walt Disney.

As part of its statement rejecting the Comcast offer, the board declared it
“has confidence in the business, financial and creative direction of Disney
under the leadership of Michael Eisner and his management team.”

When it made the bid last week, Comcast, the largest cable TV and high-speed
ISP in the U.S., said a marriage with Disney would “create
one of the world’s leading entertainment and communications companies with an
unparalleled distribution platform and an extraordinary portfolio of content

At the core of the proposed merger are the possibilities for broadband
delivery of entertainment content with a high brand value. Disney dominates
the market for animated movies and its ABC network, ABC Family and ESPN cable
outlets enjoy worldwide popularity.

Comcast pointed to its dominance in the broadband market as a key ingredient
to make a Disney merger successful.

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