Disney's Pixar deal offers both sides critical advantages, but at a price

LOS ANGELES (AP) _ The Walt Disney Co.'s purchase of Pixar Animation Studios Inc. allows Disney to inject new creative life into its animation efforts, while Pixar can end its public run at the top

Tuesday, January 24th 2006, 3:41 pm

By: News On 6


LOS ANGELES (AP) _ The Walt Disney Co.'s purchase of Pixar Animation Studios Inc. allows Disney to inject new creative life into its animation efforts, while Pixar can end its public run at the top of its game.

However, it remains to be seen whether the $7.4 billion price tag is justified _ not to mention the fate of Pixar's unique corporate culture once ensconced in a massive media conglomerate.

Executives from both companies said preserving Pixar as a separate entity was a top priority, even as Disney hopes some of Pixar's creative power rubs off on its own animation efforts.

``I think this is great for Disney, not only to have Pixar be part of the company, but to have Pixar influence the company,'' Disney Chief Executive Robert A. Iger told The Associated Press in an interview Tuesday after the deal was announced. ``It's also possible we'll look at Pixar and see not only how well it's run but how well it lives and seek to overlay that influence on some of our other businesses.''

Disney is buying longtime partner Pixar for $7.4 billion in stock. The deal will put Pixar CEO Steve Jobs in a powerful new role at Disney and makes the billionaire its largest individual shareholder, with a stake of about 7 percent.

Jobs, who owns more than half of Pixar's shares and heads Apple Computer Inc., will become a Disney director.

Disney has co-financed and distributed Pixar's animated films for the past 12 years, splitting the profits. That deal expires in June after Pixar delivers ``Cars'' and it had once appeared the companies would not renew it amid friction between Jobs and former Disney CEO Michael Eisner.

But the talks revived under Iger, who became Disney CEO last October. Disney, the theme park owner that also has the ABC and ESPN TV networks, and Pixar had talked for months about a new relationship.

Key to spreading Pixar's influence will be Pixar President Ed Catmull, who will serve as president of the new combined Pixar and Disney animation studios, and Pixar Executive Vice President John Lasseter, who becomes become chief creative officer of the animation studios and principal creative adviser at Walt Disney Imagineering, which designs and builds the company's theme parks.

Lasseter has been compared to Walt Disney by many, including Eisner. Lasseter began his career as a Disney animator and is the creative force behind Pixar's films.

``Just having someone there who has enormous influence and who has enormous respect in that position will influence how films are done at Disney from here on out,'' said John Canemaker, head of the film animation program at New York University's Tisch School of the Arts.

One immediate sign of Lasseter's influence is that plans for Disney to make the long rumored sequel ``Toy Story 3'' on its own have been scrapped. If the film is made, it will be done by Lasseter and the other creators of the original film, the companies said.

The deal may make creative sense, but the company could face a hurdle convincing investors it makes financial sense.

Under the deal, Disney said it will issue 2.3 shares for each share of Pixar stock. At Tuesday's closing price of $25.99 for Disney, Pixar shareholders would get stock worth $59.78, a 4 percent premium over Pixar's closing price of $57.57. The deal was announced after the markets closed for the day.

Disney said the deal would lower earnings over the next two years, but that Pixar will help increase earnings by 2008.

``It's something Disney had to do,'' said Harold Vogel, a media analyst with Vogel Capital Management in New York. ``It's good for both companies.''

The companies still need to reveal what Pixar's next films will be and provide more detail on how the combined entity will function, said Richard Greenfield, an analyst at Pali Research.

``The question remains whether the price/value relationship is going to bear fruit for Disney,'' Greenfield said Tuesday.

Pixar has served as Disney's de facto animation unit for a decade. Two Pixar movies, ``Finding Nemo'' and ``The Incredibles,'' have won Academy Awards for best animated feature film, and Pixar films have been a financial windfall for Disney, which receives 60 percent of the profits.

By contrast, Disney's own animation unit has struggled, producing some modest successes, such as 2002's ``Lilo & Stitch,'' and many flops, including ``Treasure Planet'' and ``Home on the Range.''

Pixar also benefits from the deal by cashing in at the top of its game, before it produces the inevitable box office disappointment, Vogel said.

``Eventually, we know that after six huge hits, there would be a film that would come along that would be less good than what they had,'' Vogel said. ``This was a good time to broaden the horizon and the canvas. I think Steve Jobs is very smart about knowing when to hold them and when to fold.''

With Jobs, Disney also tightens its link with Apple Computer, the innovative technology company behind music and video iPods.

And Jobs is likely to press Iger to further his plans to marry films, TV shows, video games and other content to computers, iPods, handheld game consoles and even cell phones.
logo

Get The Daily Update!

Be among the first to get breaking news, weather, and general news updates from News on 6 delivered right to your inbox!

More Like This

January 24th, 2006

September 29th, 2024

September 17th, 2024

July 4th, 2024

Top Headlines

November 3rd, 2024

November 3rd, 2024

November 3rd, 2024

November 3rd, 2024