In Disney-Pixar’s M&A deal; the bidder, Disney chose the option of paying for the target, Pixar’s shares with a stock-for-stock offer. Disney decided that this is the best way to finance the transaction. In this type of acquisition deal there will be an exchange of share certificates. When the target is acquired with stock-for-stock offer, new shares from the bidder's stock are dispensed directly to the target's shareholders, or the new shares are directed to a broker who looks after them for target’s shareholders. In Disney’s case, the shareholders of Pixar swapped their shares for the shares of Disney. Unlike the cash-for-stock acquisition deal, in a stock-for-stock acquisition deal the bidder can enjoy a distinct financial advantage. As per the tax laws in United States of America when an M&A deal is finance through a stock-for-stock deal, it will not be subjective to taxation. This type of offer is beneficial for the target when its shareholders do not want to recognise the taxable gains immediately. Conversely, the shareholders of the target will pay income taxes only when they sell the shares paid to them by the bidder. Shareholders of the target will pay taxes only on the variance between their cost basis in the stock of the target and the price at which they sell the stock of the bidder. This is the reason as to why numerous M&A deals are carried out as stock-for-stock transactions.
In essence, Disney ingeniously made a strategic decision to make the acquisition transaction with a stock-for-stock deal in order to steer clear from the tax man. With this in mind, Disney issued 2.3 shares of its stock for every share of Pixar stock to Pixar shareholders. Based on Pixar's fully diluted shares outstanding, this stock-for-stoc...
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... done to ensure that: human resource policies remain intact, motivation and loyalty of staff are wholly taken into account in order to prevent them from leaving due to the merge and that the creative culture of Pixar is conserved by being anatomically separated.
Both, Disney and Pixar were listed companies. On 24th January 2006, the merger deal was announced after the markets closed for the day. Prior to the announcement, Disney’s stock was priced at $25.99(close stock price) while Pixar’s stock was priced at $57.57(close stock price). However, after the announcement of the acquisition deal Pixar's stock rose by close to 1% or 45¢ in after-hours trading bringing its stock price up to $58.02. Disney's stock price fell by 55¢ or 2.16% bringing its stock price down to $25.44. With the arrival of these figures, the acquisition deal was valued at $59.78 per Pixar share.
problems. In a study done on the role of the Walt Disney Company, Vincent Faherty explains
It allows opportunities to combine the performance of certain activities, thereby reducing costs and capturing economies of scope. This is done by acquiring IP that is underexploited or unused by the owner. They have opportunities to transfer their skills, technology, or intellectual capital from on business to another. This is yet again done through media networks, parks and resorts, and also their studio entertainment. All of which allow them to go globally. Along with the opportunity to transfer skills and technology, they can use their brand name across multiple product or service categories. This is seen in the multiple IP networks, studio entertainment, multiple resorts and parks that are all around the world, and lastly, in their consumer products that were ranked number one in 2011 for being the largest licensor of character-based merchandise in the world. Value chain match-ups seen in primary activities are inbound logistics, operations, outbound logistics, the marketing/sales, and service. All lead to support activities such as technology, human resources, and general administration. Opportunities for skills transfer is seen in the media networks, parks and resorts,studio entertainment, and consumer products. Disney Company can share iconic Marvel characters in their parks/resorts, movies, and consumer products, due to buying the IP to Marvel and it does not stop at just Marvel ABC and ESPN are also involved.
Pennsylvania's Corporate Laws have very stringent antitakeover statutes. In order to get around some of these statutes the deal has been split into a two-tiered offer. First CSX will pay $92.50 per share in cash for the first 40% of the acquisition shares. This front-end offer will be separated into two stages. The first
As financial consultants, we have been asked by Walt Disney’s management to provide an evaluation of this alternative to the company for this financing decision. For this estimate, we have reviewed the data of the Consolidated Income Statements from 1982 to 1983, the Consolidated Balance Sheets of 1984 and 1983, the Historical Summary of Average Yen/Dollar Exchange Rates and Price Indexes, ECU/Yen Swap flows in the following ten years, Yen Long-dated foreign exchange forward, Cash flow of 10-year ECU Euro bonds with sinking fund (Exhibit 6), and also the list of the French Utility’s outstanding publicly Traded Eurobonds.
The most important part of Disney’s long-term success is due to its key strategic choices and incorporation of various diversification strategies. Disney created value mainly through “vertical integration” of its business lines, especially through the concept of forward integration. For example, Disney integrated production of movies and the final distribution in cinema’s or on television, especially through its acquisition of ABC in 1995 (1, p.6/7). Through this acquisition, Disney was able to extent its boundaries quickly and gain access to a wider lev...
amounts of equity (Disney and Government) as well as with subordinated debt (Government), Disney had
Disney shares have come under pressure recently despite the huge success of Star Wars. Shares started the year around $94 and as of December 28th trade around $107. However, shares have traded as high as $122 in August, before falling after the 3Q’15 earnings report. This earning report showed a little chink in DIS armor. Shares recovered and trade as high as 120 in the middle of November but have recently stumbled. After all, anticipation for the release of Star Wars was building for quiet some time. One would think that with a billion dollars in sales in the first 12 days and box office records shattered, DIS would be surging higher.
(McKenna, 2016) The other reason why I chose to buy DIS stock is because it is one of the world’s strongest and powerful brands. The Global Reptrak 100 2016 ranked Disney behind only Rolex. A strong brand brings with it many advantages, including higher margins and customer loyalty. Disney showed no signs of resting on its laurels after buying Pixar in 2006, Marvel in 2009 and Lucasfilm, the maker of Star Wars, in
In 2004 Viacom decided to sell their controlling interest in Blockbuster. Unable to locate any interest they decided to spin off Blockbuster through a stock swap. Blockbuster would have to pay Viacom shareholders $5 per share resulting in nearly $1 billion in debt. At the time Blockbuster management thought they could quickly pay down the debt with their $500 million a year...
A great deal of companies and corporations, whether diminutive or immense, merge to become one company. Mergers and acquisitions (M&A) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity. For instance, the Merger between Sony and MGM in 2005, Sony even took the debt from MGM. The purpose of this paper is to discuss the following: company history on both companies, the merger, price paid, debt, movies, contract, stock price, benefits, lawsuits, communication and money conversion.
By adding Jobs to the board of directors not only did Iger add another influential and successful member to the team but also assured the acquisition of Pixar Animation Studios. This venture was an integrative (or win-win) negotiation for both Iger and Jobs. As stated in our reading, “when conflicting parties truly collaborate, this can result in a merger of insight, experience, knowledge, and perspective that leads to higher-quality solutions than would be obtained by any other approach.” In both of these conflicts the needs of all involved were
In conclusion, Disney appears to be a very strong company financially. They do not have any major red flags. Their liquidity ratios and other information does not seem to be alarming in any way. They have been around for many years and are extremely successful, so any obstacle in their way will not be an issue. They will be able to work through it and bounce back from it without a problem.
...ffer of $3,000,000/1 million shares = $3 per share. Compared to the current price per share of $2.50, this represents a 20% premium. The price per share of XYZ upon the announcement will therefore be $3, and the price per share of ABS upon the announcement will be $20 – 20% x $2.50 = $19.50.
Through the ratio analysis, we can conclude that Disney is a stable company, keeping up with industry trends and up to par with industry averages. Although at times it can seem that Disney is a risky and unstable company, those conclusions are false since the unstableness has come through decisions which will better establish Disney’s position on the market. Although Disney’s competition, namely CBS, is on a similar standing as Disney when comparing ratios, Disney will manage to remain the largest media conglomerate in the USA and one of the best corporations in the world.
Generally speaking, the change in stock prices on the day of the acquisition announcement means that the market approves or disapproves the acquisition. As the market value of Berkshire 's company went up, it demonstrates the market approval of it and created value of $2.55 billion for both buyers and sellers.