by John M. Curtis
(310) 204-8700

Copyright February 14, 2004
All Rights Reserved.

armonic convergence—the esoteric alignment of celestial forces—has nothing do with the curious timing of Comcast Cable's bid to take over of The Walt Disney Co. When Comcast CEO Brian Roberts stunned Wall Street with his $51 billion stock-swap offer, the connection with (a) Pixar ending its partnership with Disney, (b) Roy E. Disney and Stanley P. Gold's feverish attempt to oust Disney Chairman Michael D. Eisner, (c) Disney's recent analyst meeting in Orlando and (d) Disney's upcoming shareholders' meeting in Philadelphia wasn't clear. “Disney is a solid, growing, creative, family-oriented, quality company that has strong culture and a strong balance sheet and strong cash flows, and I feel pretty comfortable that we're on the right track,” said Eisner, defiantly slapping Roberts in the kisser. Roberts' pie-in-the-sky fantasy about creating the planet's largest media company can't pass unnoticed.

      Roberts speculated that the combined entity would bring economy-of-scale and abundant new revenue streams. That was the same maniacal pitch made by AOL's ex-Chairman and CEO Steve Chase to Time Warner's Gerald Levin before creating history's biggest media boondoggle. AOL wanted Time Warner's content and diversified revenue. Time Warner wanted AOL's stable cash flow but, instead, got an albatross strapped with declining enrollment and growing debt. While Comcast boasts the nation's largest cable operator, they face flattening growth, stiff competition from Satellite TV and declining revenues. No one knows for sure whether Disney's disgruntled ex-board members had a hand in orchestrating Comcast's recent takeover. Since resigning in protest from Disney's board last year, Disney and Gold have worked full-time to sabotage Eisner and take over the company.

      Getting lost in minutia, it's difficult to see the bigger picture. Roberts lunged for Eisner's jugular, deluded into believing phony press reports—largely stemming from Disney and Gold—that Eisner was vulnerable from the botched Pixar deal. In reality, Steve Jobs got too big for his britches, trying to out-negotiate Eisner and the Magic Kingdom. Pixar's offer was an unprofitable deal-breaker, having nothing to do with Eisner's failed relationship with Jobs or anyone else. When Roberts pulled off the deal for AT&T Cable in 2001, it was less related to shrewdness than AT&T's cash flow problems and proximity to bankruptcy. His recent bid for Disney miscalculated Eisner's vulnerability at a time of improved earnings and share prices. Disney's board and shareholders aren't ready to cave in to Comcast, judging by the sudden surge in Disney share prices.

      Comcast's offer put Disney on the defensive, revealing why the merger wasn't good for either company. Roberts wasn't seeking a mediocre cable operator: He was trying to pull a fast one with the world's most prestigious media company. Investors reacted harshly, driving down Comcast shares, pushing Disney stock to recent highs and making the deal less appealing. Disney may not need New York's famed 72-year-old “poison pill” lawyer Martin Lipton, whose clever legal strategies helped vulnerable companies avoid hostile takeovers. “It's a clear signal to Comcast that ‘We're going for the big guy and we're going to fight,'” said John F. Olson, partner at Gibson, Dunn & Crutcher in Washington, signaling that Eisner intends to stop Comcast's corporate piracy. With Disney's shares up and Comcast's down, it's unlikely that Roberts' deal—sweetened or not—would stand.

      Without a smoking gun, it's difficult to tell the extent to which Roy Disney and Stanley Gold's fingerprints were all over Roberts' offer. Whether liked or not, Roberts doesn't quite get that Disney has fierce brand loyalty with Wall Street, board members and, yes, shareholders, unwilling to sell out one of America's best brands to a second rate corporate raider. “The deal isn't going to get done here,” said Alec Cutler, a managing director at money manager Brandywine Asset Management in Wilmington Del., believing that opposition to the merger exists among Comcast and Disney shareholders. Forward thinking CEOs like Roberts always look to hedge bets against declining business opportunities. With satellite TV gaining ground, cable companies' growth rates are already seeing declines. Roberts correctly read his balance sheet but misjudged the market and Eisner's corporate savvy.

      Comcast CEO Brian Roberts read too many stories about Eisner's impending doom in Disneyland. Slick public relations, largely stemming from Roy Disney and Stanley Gold's wishful thinking, created false impressions that Eisner lost his grip in downtown Burbank. There's nothing wrong with forward thinking CEOs looking for new business. Like Pixar's Steve Jobs, Roberts got bad advice, underestimated Eisner's corporate skills and way overestimated his own. “I am not sure I want to see Disney sold,” said Sarat Sethi, a principal and portfolio manager at Douglas Lane & Associates in New York, watching Disney's improving financials and seeing no need for merger. Only Roberts, Disney and Gold see the necessity of getting rid of Eisner and acquiring Disney. When Disney's board and shareholders wise up, they'll tell Roberts: “Nice try but no thanks!”

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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