Bid For Disney Too Low, Some Analysts Say

Walt Disney Company board members say they will evaluate Comcast's surprise bid to buy the entertainment giant, but the the nation's largest cable television operator may have to increase its bid if it wants to succeed, some analysts say.

The proposal, announced Wednesday by Comcast, included stock valued at $54 billion, which amounted to $26.49 per share of Disney stock, but on the heels of the announcement and Disney's strong quarterly earnings report, also released Wednesday, the company's stock surged in trading and closed higher than the offered price.

"That was the opening bid," said Tom Wolzien, a media analyst with Sanford C. Bernstein. "These deals often take months to play out. You could think of it as a chess match and I think the CEO of Comcast is known to be a savvy deal maker. He's not going to pay any price, but I think he knows he'll have to pay more."

Disney's quarterly report indicated that the surge Wednesday might not be a one-day fluke created by excitement over the merger proposal. If Disney continues on what CEO Michael Eisner called "the road to recovery," then Comcast's efforts to persuade the Disney board could be complicated, Wolzien said.

After the quarterly earnings report, listing first quarter revenue at $8.55 billion, compared to $7.1 billion a year ago, and profts at 33 cents, versus 5 cents for the same period last year, Disney's stock jumped 14.62 percent to close Wednesday at $27.60.

And the improvement Disney has shown over the last year could have played as much of a role in the timing of Comcast's move as the controversy over how Eisner has run the entertainment giant raised by former board members Roy Disney, the founder's nephew, and Stanley Gold.

"If Disney is on recovery, then the price of Disney would keep going up," Wolzien said. "So in a way, Comcast's decision to go after it now indicates that they think it's an opportunity. Disney did a nice job over this last quarter, they reported with record numbers thanks to Finding Nemo and Pirates of the Caribbean. So Disney is on the way back, just a question of how fast."

Comcast CEO Brian Roberts said Wednesday the company went public with the unsolicited offer after Eisner declined to enter discussions. In addition to the stock valued at $54 billion, the proposed merger would include assumed debt of $11.9 billion.

At a Disney investor conference in Orlando, Fla., on Wednesday, Eisner acknowledged the offer.

"We did get an unsolicited offer today, which the board of directors of the Walt Disney Company will take under advisement, carefully consider and in due course have a response," Eisner said.

"The ball is in Disney's court," Roberts said. "I don't feel that there's anything to be bashful about. We think it's a very fair proposal. I hope the board will consider it."

If the two giant companies were to merge, it would combine the largest cable service provider — with 21 million subscribers — with Disney's theme parks, movies, ABC television and radio networks and the ESPN cable television network. Comcast is also a major player in high-speed Internet service, serving more than 5 million subscribers.

Comcast, which has grown rapidly in the past decade, including with a merger with AT&T Broadband in late 2002, calls the offer a wonderful opportunity to combine distribution — which Comcast has plenty of — and content, in which Disney is rich.

"This is a pretty compelling combination," Roberts said.

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