Walt Disney's (DIS) purchase of Marvel Entertainment (MVL) for $4 billion in cash and stock, announced on Aug. 31, clearly gives Disney another strong brand. But just as important, it gives it a brand to sell to teen boys, which has remained a lingering weakness for the company that sells tons of Hannah Montana clothes to preteen girls and Mickey and Minnie toys to younger children.
Through its history, Disney had been one of Hollywood's biggest brand hunters, with a collection of acquisitions that have included Winnie the Pooh, ESPN, and the ABC TV network. The deal also represents the latest step in the march by Disney CEO Bob Iger, who took over the top job in 2005, to build out the company that he inherited from former top Disney executive Michael Eisner. Just months after taking the job, Iger engineered the $6 billion acquisition of Pixar, the computer animation powerhouse headed by Apple's Steve Jobs, with whom Eisner had feuded. Earlier this year, Iger cut a distribution deal with Steven Spielberg's newly recreated DreamWorks film studio, after Spielberg had left Paramount (VIAB) and nearly signed with Universal Pictures (GE).
"This transaction combines Marvel's strong global brand and world-renowned library of characters, including Iron Man, Spider-Man, X-Men, Captain America, Fantastic Four, and Thor, with Disney's creative skills, unparalleled global portfolio of entertainment properties, and a business structure that maximizes the value of creative properties across multiple platforms and territories," said Iger said in announcing the transaction.
A Valuable Combo Disney already features Marvel shows that include Spider-Man, X-Men, and The Incredible Hulk on its newly christened all-boys cable channel, Disney XD. The deal does present one problem to future exploitation of some Marvel properties, however. Marvel has made movies of some of its most profitable franchises for other studios—Spider-Man at Sony (SNE) and Iron Man with Paramount—and has licensed its properties widely throughout the entertainment world. It currently licenses its characters, for instance, so that Spider-Man appears at Universal Studio theme parks in Japan and in Orlando, where it has created a Marvel Super Hero Island.
Still, Marvel has traditionally cut handsome deals for itself with those properties, and Disney gets a huge upside from a library of more than 5,000 other characters.
The deal, which valued Marvel at $50 a share, represents a 28% premium to Marvel's stock price, which closed on Aug. 28 at $38.65. Under the arrangement, Marvel will continue to be operated by longtime President and CEO Ike Perlmutter, who will oversee the brand but will not join the Disney board. Perlmutter, who owns 37% of Marvel, also stands to reap more than $1.5 billion in cash and stock from the Disney purchase. After the deal is completed—Disney said it is subject to federal antitrust review—Perlmutter would control 22 million Disney shares, or about 1.4% of Disney's stock.
Marvel shares jumped $10.19, or 26%, to $48.84 in the first half hour of trading. Disney shares were off 36¢, or 1.3%, to $26.48.
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