Disney considers buying Pixar
By Gary Gentile
By Gary Gentile
LOS ANGELES — The Walt Disney Co.'s possible acquisition of Pixar Animation Studio could make Pixar CEO Steve Jobs a member of Disney's board and its single largest shareholder, a newspaper reported yesterday.
Shares of both companies rose slightly after The Wall Street Journal, citing unnamed sources familiar with the plan, reported Disney was in serious talks to buy Pixar.
Both companies declined comment to The Associated Press.
Pixar has made several hit movies, including "Toy Story" and "Finding Nemo." Jobs is its largest shareholder, with more than 60 million shares, or 50.6 percent, according to Pixar's filings with securities regulators last year.
At its current share price, his stake is worth about $3.44 billion.
Jobs also heads Apple Computer Inc., the maker of the hugely successful iPod music and video player.
"Investors may hope that Mr. Jobs' successful track record at Pixar and Apple will rub off more broadly on Disney," Richard Greenfield, an analyst at Pali Research, wrote in a report yesterday.
Greenfield estimated that Jobs could gain a 6 percent stake in Disney as the result of a merger. Disney's largest reported individual shareholder now is former CEO Michael Eisner, who owns 1.8 percent of outstanding shares.
Pixar shares rose $1.61 a share, or 2.81 percent, to close at $58.87 yesterday on the Nasdaq Stock Market. Disney shares gained $1.04, or 4 percent, to $26.24 at the close of trading on the New York Stock Exchange.
Disney CEO Robert Iger has made it clear that technology will be a cornerstone of Disney's success in the future. Having Jobs on Disney's board could strengthen the link between Disney's content and the technology that links TV shows, movies and music to consumers.
"In our view, no company understands both technology and the consumer better than Apple," analyst Kathy Styponias of Prudential Equity Group wrote.
Reports of a possible Disney-Pixar merger first surfaced several weeks ago after shares of Pixar jumped, leading analysts to speculate that Jobs might become Disney's chairman.
Disney and Pixar have been talking for months about a new relationship.
Disney has co-financed and distributed Pixar's animated films for the past 12 years, splitting the profits. But that deal expires in June after Pixar delivers "Cars."
The company, based in Emeryville, is already at work on its next several films but has yet to decide if Disney or another studio will distribute them. The studio makes one movie a year.
Many analysts expect a new distribution deal soon but dismissed the idea of Disney buying Pixar as so expensive that it would dilute Disney's earnings for several years.
Others said that if Disney paid only a slight premium for Pixar's shares, as the Journal report suggests, Disney could recover fairly quickly, especially if Pixar increases its production to two films per year.
"Despite dilution in the near-term and the likely negative impact Disney's stock would take should it acquire Pixar, we believe the deal would make sense both strategically and, eventually, financially," Styponias wrote.