A Look Back At The Marvel-Disney Deal

By Greg Sushinsky | December 29, 2009 AAA

The Marvel Entertainment (NYSE:MVL) acquisition by Walt Disney (NYSE:DIS) was announced in the midst of a still-surging stock market at the end of the summer. Disney's offer to purchase Marvel for $4 billion in a combination of cash and stock at a premium of nearly 30% certainly was a way to end the summer with some hot stock news. At the time, the deal was generally hailed, although there were some doubters among investors, with reasonable objections raised. Now, we revisit the prospects for Disney-Marvel as the deal is set to officially close.

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Did Disney Pay Too Much?
The equivalent of $51 per share that Disney is paying for Marvel seemed too rich for some. Marvel's admittedly popular creative content and its operations, which includes film and to a much lesser extent comic books, is difficult to quantify for the long-term. After all, Disney has found its own movies rough going recently, with declining revenues in the last year. Also, the vagaries of hits and misses with movies puts the Marvel machine on risky footing if one of its big name properties should be a dud at the box office. Still, Disney attempted to take the long view and conservatively value the operating income that Marvel will add, despite the uncertainty of the movie business. (For more, read Mergers & Acquisitions: An Avenue For Profitable Trades.)

Disney Is Different
Disney also is a media company which, despite its far-flung empire - including parks, movies, broadcast and cable TV, licensing and so on - fits well together. Even in a terrible recession, the aggregate of all Disney pieces still produced strong earnings in this last fiscal year. Also, Disney has a habit of integrating its acquisitions well, even when they are initially troublesome, like the situation with Pixar. Contrast this with Time Warner (NYSE:TWX), a company that sometimes looks a bit like Disney but isn't. Part of Time Warner should look like Marvel - the DC Comics part - but it doesn't. Has Time Warner maximized the DC Comics properties the way Marvel has maximized its super heroes?

A Different Kind Of Merger
It was predictable, in fact predicted, that one of the aftershocks of the Disney-Marvel deal would be more media amalgamation. Indeed, Comcast (Nasdaq:CMCSA) was singled out after the Marvel-Disney deal as a company with lots of cash, on the prowl for a media partner to spend it on. Thus, a few months later, the Comcast-General Electric (NYSE:GE)-Universal deal happened. This may eventually turn out to be a good deal, but it is a merger of a different order. It is more of a cerebral mating of media distribution channels and content providers, but not ardent creators - at least not in the way that Disney and Marvel still are, or can be. (For more on acquisitions, read How The Big Boys Buy.)

The Marvel-Disney Bond
Rational answers to the potential problems with the Marvel-Disney deal can be framed in terms of the unparalleled licensing and marketing clout of Disney, or the scale with which the companies can push Spider-Man and Mickey Mouse together into any entertainment domain they enter. Or, rational debate can surround whether the comics Disney bought are dying or already are a dead industry, or again, whether Disney will revive that sagging business. Still, more rational calculations can and have been made as to which of the Marvel pantheon of superhero characters can be mined as evergreen film franchises. All interesting, relevant calculations. However, at the end of the day, you sense that Disney's revived enthusiasm in its post-Michael Eisner years under Bob Iger, with the blessings and encouragement if not the imprimatur of Roy Disney, may have been the siren song that led them to Marvel. For that's where Marvel's darker, edgier heart has always been - on the other side, the missing side, of Disney. Here's betting they make this marriage work. (For further reading, check out Analyzing An Acquisition Announcement.)

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