Wednesday, August 07, 2013

Acquisitions Worth the $$$?

The Globe and Mail pose the question: Is Diz Co. overpaying for all their new jams and jellies?

Walt Disney Co. boss Bob Iger has another Pixar hit on his hands. Monsters University should provide an eighth consecutive animated lift to Disney's bottom line when it reports quarterly results today. But a Breakingviews analysis suggests the studio's value to the Magic Kingdom falls short of the $7.4-billion (U.S.) purchase price. High-priced deals for Marvel and Lucasfilm may also disappoint investors in the long term. ...

Buying Pixar was practically a necessity. Mr. Jobs became Disney's biggest shareholder and a director. Pixar's creative force, John Lasseter, also infused Disney with a fresh spark. To acquire all that from a position of weakness, Disney paid over the odds at an estimated 45 times earnings when the deal was announced.

Disney says Pixar's value "far exceeds" the acquisition price calculated using "net present value" across its businesses. Absent more specifics, the statement requires a certain amount of wishing upon a star. ...

Robert Iger is a smart guy. But he's also a (womewhat) short-term guy. He's not going to be around a lot longer, and he needs to get equity value up. He's got big stock options, after all.

In the long-term, it's likely better to home-grow your hits. If you develop properties in-house, you don't have to cut outside entities a thick slice of the action. With Pixar, of course, Disney was over a barrel. The Mouse needed Steve Jobs's animation studio more than Mr. Jobs needed the rodent. Any number of entertainment conglomerates would have coughed up signficant coin to distribute Pixar movies. (You might have noticed that, even though critics are no longer shouting "Hossanah!" for each and every Emeryville release, all the long-form cartoons have been significant money-spinners.) At the time, Disney's animated product was in the doldrums, so Mr. Iger felt it imperative to make nice with Steve J. and mend a big fence.

That's not the same, of course, with Marvel and Lucasfilm. But I assume Mr. Iger sees profit in acquiring the Marvel and Lucas shops, at least in the short-run. And Robert Iger is focused on a tight time-frame because he has retirement staring him in the face.

I doubt that he gets too torked up about the long-run, because he will by then be a retired CEO, sleeping on a beach in Bermuda.

Add On:What with Diz Co.'s quarterly report of flat earnings, what with the lacklustre results of the film division, this development isn't too suprising:

Disney is talking with producer Jerry Bruckheimer about restructuring his deal for "Pirates of the Caribbean 5," and will likely strip his final cut privileges and limit the budget on the next installment of the film franchise, according to two individuals close to the project.

Bruckheimer has had final cut on prior titles in the franchise, which has grossed close to $4 billion at the global box office across four films. ...


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