COMCAST LAUNCHES HOSTILE BID FOR DISNEY

Having tried and failed to open merger talks with Walt Disney Co. chief Michael Eisner, cable giant Comcast Corp. today made a public bid for the company, proposing a tax-free exchange of stock that pegs Disney’s value at $66 billion, or 14 times the company’s 2004 estimated EBITDA, according to reports.

Comcast President/CEO Brian Roberts released a letter he wrote to Eisner, which begins, “Dear Michael: I am writing following our conversation earlier this week in which I proposed that we enter into discussions to merge Disney and Comcast to create a premier entertainment and communications company. It is unfortunate that you are not willing to do so. Given this, the only way for us to proceed is to make a public proposal directly to you and your Board.”

The letter goes on to describe Comcast’s offer, which would give Disney shareholders 0.78 Comcast shares for each Disney share. Comcast says that represents a $5 billion premium (about 10%) for Disney’s investors, based on Tuesday’s closing share prices for both companies. After the stock swap, Disney shareholders would control 42% of the combined company.

Trading of Disney shares was halted Wednesday morning on news of the bid. Disney shares had been poised to rise sharply on opening, while Comcast’s shares were down nearly eight percent in early trading.

“The combined company would be uniquely positioned to take advantage of an extraordinary collection of assets,” Roberts writes. “Together, we would unite the country's premier cable provider with Disney's leading filmed entertainment, media networks and theme park properties.” (Hey—what about Hollywood Records?) “In addition to serving over 21 million cable subscribers,” he continues, “Comcast is also the country's largest high speed internet service provider with over 5 million subscribers.”

The letter further states that Comcast management “greatly appreciates and is highly respectful of the Disney heritage” and that many Disney executive would be expected to play key roles in managing the combined company. “We also would welcome directors from your Board joining our Board,” Roberts writes. Gosh, that sounds cozy.

Comcast says it is confident regulatory approval of the deal could be obtained “in a timely fashion.”

Disney and Comcast each also posted strong first- and fourth-quarter results today, with Disney releasing its numbers earlier than expected in response to the bid.