Comcast Corp, America's largest cable television operator, has made an unsolicited offer to buy Walt Disney Company in a hostile bid worth $66 billion, reports ABC News.
The surprise bid, if successful, will create one of the world's biggest media companies and put it in league with Time Warner Inc and News Corp. Comcast has 21 million cable subscribers and is also a major player in high-speed Internet service, serving more than 5 million subscribers.
Disney has interests in films, theme parks, ABC television network and ESPN sports network.
ABC News reported that Comcast President and CEO Brian Roberts said "the company was going public with the unsolicited offer after Disney Chairman and CEO Michael Eisner declined to enter discussions.
The proposed merger includes stock valued at $54 billion and assumed debt of $11.9 billion.
Walt Disney confirmed the offer, saying: "The Walt Disney Company board of directors has received and will carefully evaluate the unsolicited proposal from Comcast Corp," said ABC News. Eisner too acknowledged the offer but refrained from adding to what the board of directors had said.
Comcast Corp has proposed to issue 0.78 of a Comcast share for each Disney share, which is currently at $26.47, providing Disney shareholders with a premium of more than $5 billion (or a 9.9 per cent premium on Disney's stock price), based on stock prices as of closing Tuesday.
Under the proposal, Disney shareholders would hold 42 per cent of the combined company, said ABC News.
Disney's stock jumped 14.62 percent to close on Wednesday at $27.60. Comcast stock dropped 8.62 per cent to close at $30.10. Analysts said the jump in Disney stock will force Comcast to increase the price.
The Comcast chief said that the ball was in Disney's court, as the offer was fair. He hoped that the Disney board would consider the proposal.
ABC News reported that Comcast, which has grown rapidly in the past decade, including with a merger with AT&T Broadband in late 2002, "calls the offer a wonderful opportunity to combine distribution -- which Comcast has plenty of -- and content, in which Disney is rich."
Meanwhile, amid questions of how the merger might affect consumers, Federal Communications Commission chairman Michael Powell said his agency would be closely watching developments with the proposal, said ABC News.
Disney chief Michael Eisner has been under pressure for a while now. Board members Roy Disney (nephew of Disney founder Walt Disney) and Stanley Gold have censured his performance for letting the talks with animation studio -- Pixar -- collapse and also for not readying a succession plan as Disney's chief executive, said ABC News.
Comcast President Steve Burke, a former Disney executive, identified animation as a key issue to be addressed and said if the merger went through, the new giant would reach out to companies like Pixar, reported ABC News.
Burke also said there would be savings of $300 million to $400 million by eliminating overlapping elements in the two companies.
ABC News quoted David Miller, an analyst who covers Disney and other media companies for Sanders, Miller and Harris in Los Angeles, as saying: "We think this is a lowball bid. Comcast is only offering a 9.9 percent premium over the Tuesday close. Disney is already trading higher than that today. Wall Street is telling Comcast they will have to up the offer. Shareholders will want more for their shares."
Miller, reported ABC News, said it is not uncommon for a company making a hostile bid to have to come back with several offers if the board rejects the initial offer.
However, the deal could be advantageous for both sides if it went through, said ABC News, as strategically it makes perfect sense for a studio operator to merge with a cable distributor, merging content with distribution.
Some analysts predicted that if the deal went through, it could result in lower rates for cable television subscribers, though one company would control both a good deal of the content available and how it is delivered, reported ABC News.
Disney's first quarter revenue stood at $8.55 billion, compared to $7.1 billion a year ago. Comcast's revenues stand at $4.74 billion.
