Doctor Gonzo

So do you think this will be good or bad for either company?

from USA Today:

Report says Disney, Pixar engaging in buyout talks

By David Lieberman and Laura Petrecca, USA TODAY
Walt Disney (DIS) shares rose 4% and Pixar (PIXR) shares closed up nearly 3% after a published report that the companies are discussing a possible Disney purchase of the computer-animation studio.
That is now on the table as they discuss a future after their often rocky, but always profitable, partnership expires in June, The Wall Street Journal reported Thursday. Both companies declined to comment.

Since 1997, they made computer animation one of cinema's most lucrative genres as Disney distributed Pixar-produced blockbusters including Toy Story, Finding Nemo and The Incredibles. In the same period Disney — known for drawn animation classics including Snow White and The Lion King - produced disappointments including Atlantis and Treasure Planet. The company's first solo, fully computer-animated film, Chicken Little, was a modest hit in late 2005.

"Animation is central to everything they do" at Disney's movie, TV and theme park empire, Sanford C. Bernstein's Michael Nathanson says. He says they must have decided "that on their own they can't create enough must-have content and must believe that Pixar has the secret sauce."

It would be a "nice payday for short-term investors" in Pixar, says Harris Nesbitt analyst Jeffrey Logsdon. And Disney gets "proven animation capability, production expertise, management and leadership, all things that are very hard to buy," he says.

But analysts warn Disney might overpay if it has to add a premium to Pixar's market value, already up 40% since September. "The stock has run up in anticipation" of a deal, says Michael Cuggino, president of Permanent Portfolio, which owns 95,000 Disney shares.

Pixar closed Thursday at $58.87, up $1.61, which means the market thinks it's worth at least $7 billion. The company generated an estimated $143 million in net income in 2005 on revenue of $276 million — about 94% from films in the Disney partnership.

The numbers might look worse if Pixar films lose some of their cachet — if they're simply triples or doubles instead of home runs.

Richard Greenfield of Pali Research worries that Pixar may be "selling right at the top knowing that its upcoming original films are not as good."

He adds: "Pixar does not need to sell; it could easily have struck a distribution deal with Disney or another studio. Why trade a clean and simple studio with a perfect track record for 13% to 14% of Disney, which owns businesses that have uncertain futures like broadcast TV and radio stations, and slower growth businesses like theme parks?"

Disney and Pixar currently split production costs and profits, plus Disney gets a distribution fee of as much as 15%. It also gets rights to the characters for sequels — a point that has irked Pixar CEO Steve Jobs.

Dazed

Disney need this as their non Pixar 3D films havent exactly set the world on fire.

I just cant believe Jobs would sell to Disney after all the bad blood.

Terrell

Disney survived long before Pixar came along. They'll survive long after Pixar is gone. About the time Disney buys them, Pixar's film will probably take a deep slide. That's usually how things work. Just remember this. Disney went on 2-3 runs like Pixar is on now. Everybody said "Disney can't lose!" But it always ended. The same thing will happen to Pixar. Their next film, Cars, doesn't look so hot. Sooner or later, Pixar will hit a bad streak.

It would be nice if they could work their differences out and keep their autonomy. But I'm not one to slam Disney and praise Pixar, simply because it's popular nowadays to do so. Nothing would suit me more than to see Disney Animation get back to form and spank Pixar at their own game. We'll see if Iger can do that.

The thing that will get Disney back on track is when they stop thinking of "brand" and start thinking about "quality product". Stop micromanaging everything and let the artists make the decisions, not the pencil pushers.

Michael Corvin

The bad blood was between Eisner & Jobs. Jobs has been in talks and negotiating since Igor was announced before Eisner was gone.

It would be great to see Pixar remain autonomous but working with Disney. Once the corporate money of Disney seeps in so do the pencil pushers that think they know what's best for the company. See Hercules, Hunchback, Treasure Island, Brother Bear, etc.

FinkPish

Exactly my feelings. Pixar is great at developing creative stories that don't feel like they were written by committee, even though a lot of people are involved in the process. If Disney executives were to get involved in the actual storytelling process, I can't see much good coming out of it.

Jackskeleton

Chicken little did 248 million world wide.. is that not steller work? Now that Eisner is gone, I see no reason why this is a bad thing. Pixar is in business to make family friendly films and that is what Disney wants as well.

Nesbit

Is there any bad blood between John Lasseter and Disney?

tanman

What would that accomplish exactly? I know why you are irked by people praising Pixar and bashing Disney but if you look at their track record over the last ten years. What does that tell you. Wanting Disney to spank Pixar at their own game is pointless. I still think there is plenty of room for more animation. Over the past few years there have been more and more animated films. I think that Disney and Pixar and peacefully coexist and be successful.
Why oh why would this be good news?! At best Pixar gets to put the the Disney name in front of it's own once more and gets a little financial help and exposure. At worse Disney bureacracy comes in and starts micromanaging Pixar. If you look at their special features the entire Pixar staff seem to work really well together. Now you throw in different people into the mix who they have to answer to.

Not good news at all if it is true.

Personally I can't wait until Disney gets back on track again but I sure don't want them to drag along Pixar for the ride. I don't see Disney having a neo neo classic period in the near future as their backs are not against the wall as it was before they had a shake down and resulting prolific phase.

Libby

maybe with the merger we can finally see animated movies back at top form. Hard to say if would be sucessful though....

Jackskeleton

Uh.. just a little? I'm sorry, but you have a McDonalds agreement (sure, it's going to end soon), A theme park, a parent company owned network television station, cable channels, name appeal that you can't buy with millions of bucks. Disney is much more than "a little" help to get something exposed to others. Pixar would never have to worry about distribution and that is a stress releiver that you can't believe.

Breakfast with Girls

I would hope this wouldn't happen, but after Cars is released I think Disney will be in a better position to try, since that just looks all kinds of crappy.

Terrell

Well, you completely misread my intention. I wasn't saying I hoped Disney would put Pixar out of business, but rather create even better animation that Pixar. I myself don't want Disney Animation to basically become Pixar animation, because it's not the same thing. I want Disney Animation to have a renaissance and regain the form. Keep Pixar and Disney Animation seperate, even if Disney buys Pixar. Let them each do their thing. Perhaps put Pixar under Brad Bird and Disney Animation under John Lassiter, since that's his roots.

majorjoe23

Considering most Pixar films do that domestically, it's not that stellar.

Supermallet

I don't see any benefit to Pixar here, other than the fact that most people have associated Pixar with Disney. But the Pixar name itself is well-known, and all the ads have to do is say "From the creators of Finding Nemo!" to draw in the crowds. Considering their track records, any studio would be willing to distribute them, especially Fox, who has been trying for years to break Disney's animation monopoly.

Perhaps Jobs is more focused on Apple and just wants to unload Pixar for a big paycheck.

RichC2

Could you blame him?

Terrell

Well, perhaps it's telling that Pixar didn't sign any deals after falling out with Disney. Why didn't they try to go it alone if they were that confident? Maybe they thought they needed Disney for it's name and marketing muscle. We can argue all day long, but I do think Pixar gains from Disney's name, just as Disney gains from Pixar.

Still, I thought Pixar would go it alone and find another distributor instead of Disney. I'm even surprised that talks renewed with Disney, with the acrimony that seemed to develop between the parties.

mrpayroll

http://news.yahoo.com/s/nm/20060124/...ixar_disney_dc

Disney board okays takeover offer to Pixar: source 55 minutes ago



LOS ANGELES (Reuters) - The board of Walt Disney Co. (NYSEIS - news) has authorized Chief Executive Robert Iger to make an offer to buy Pixar Animation Studios Inc. (Nasdaq:PIXR - news) and is expected to do so by Tuesday, a source familiar with the matter said late on Monday.

Pixar's board is expected to consider the offer on Tuesday as well, said the source, who did not disclose financial terms.

Pixar shares closed at $58.27 on Monday on Nasdaq, putting its market value at just under $7 billion. The shares have risen about 12 percent in the last month, partly on speculation that Disney would buy the computer animation company behind such hits as "Toy Story," "Finding Nemo" and "The Incredibles."

The Wall Street Journal has reported that Disney is considering an all-stock offer, which would make Pixar Chief Executive Steve Jobs its largest individual shareholder.

The Journal reported late on Monday that the offer under consideration would give Jobs, who has a controlling stake in Pixar, a set on the Disney board.

Disney shares closed 0.78 percent lower at $25.52.


As an employee, I was hoping that they would make this decision.

Now let's see what the future holds for this merger and if it does go thru, how it will benefit both companies.

Chris

BigDan

It's amazing to me that a company with a only a small number of produced films in its library and with a fairly long time between films could be worth $7 billion when MGM/UA (including the Bond franchise, MGM's post-1986 catalog, UA's post 1952 catalog, Orion's film and TV library, the pre-1996 Samuel Goldwyn library, etc) was sold last year for $5 billion.

Even if each new Pixar film threw off $500 million in profit all in, it'd take 30 years to earn back what they paid for it at Pixar's current output.

But I guess that's why I'm not one of them high-falutin' finance guys.

Jackskeleton

You're not looking hard enough.

"The Wall Street Journal has reported that Disney is considering an all-stock offer, which would make Pixar Chief Executive Steve Jobs its largest individual shareholder.

The Journal reported late on Monday that the offer under consideration would give Jobs, who has a controlling stake in Pixar, a set on the Disney board."

You think Disney will be forcing creative control when you have their guy as the single largest shareholder? You see the benefit now?

Supermallet

You're right. I wasn't looking hard enough. Go Jobs!

mrpayroll

It's not just profits from the film that Disney is looking at. Think merchandise, new themepark rides, etc. If it were just about movie profits, then I don't think Disney would be doing this.

Chris

BigDan

Well, I was figuring about $250 million in profit from the movie itself and another $250 million in ancillaries per movie on average, which would equal roughly 10% of Disney's FY2005 profits. I'm personally skeptical that a movie every other year, even one with significant opportunities for a wide variety of ancilliary products, etc. could generate an additional 10% in profits for the company.

But even if you double the profit, that's still 15 years to recoup and assumes there won't be a dog in the bunch, something that even Andy Fastow would feel uncomfortable assuming.

Michael Corvin

Doesn't Disney make about $500 mil worldwide on each release? That would be before DVD & merchandising. Being able to release & pull home video versions is a boon for Disney.

Smaller but also important factors may include: how do you value not having Pixar as your competition? Critical acclaim & awards?

Brain Stew

I think you need to remember that Pixar is pretty much THE computer animation production house. In much the same way that ILM is considered THE special effects house. When you buy Pixar, you buy the best animators.

BigDan

In grosses, yes, the Pixar movies do in excess of $500 million worldwide, but that's not pure profit. Using "The Incredibles" as an example. It grossed roughly $630 million worldwide, subtract the reported budget and P&A costs of $150 million, and it's down to $480 million, of which the theaters end up with roughly 45% (though different for different movies, this is the general "rule of thumb" number), leaving an estimated $264 million for Disney/Pixar.

Looking at Pixar's Income Statement, they had total Net Income of $141.7 million in FY2004. Disney had $329 million net income from consumer products and $1.12 billion in studio entertainment for FY2005 (which began Oct. 1, 2004 and would include the entire "The Incredibles" release).