Disney's premium for Marvel: Not enough, or too much?

Some Marvel Entertainment Inc. shareholders may wonder if they’re getting a high enough premium for the company in Walt Disney Co.’s $4-billion takeover offer today.

Wall Street may be wondering just the opposite: whether Disney is overpaying.

The cash-and-stock deal -- each Marvel share will fetch $30 cash plus 0.745 of a Disney share -- valued Marvel at exactly $50 a share based on Disney’s closing stock price on Friday.

That was a 29.4% premium to Marvel’s closing price of $38.65 on Friday.

As premiums go, that’s less than the 36.8% average offered this year in other U.S. merger deals worth $1 billion or more, according to data firm Dealogic Inc.

Still, Marvel shares already were up 26% year to date through Friday, nearly double the advance of the Standard & Poor’s 500 index.

And based on the price it’s paying, Disney estimated that Marvel won’t begin to add to the Burbank giant’s earnings until fiscal 2012.

Disney executives’ tone on a conference call with analysts today suggested that they know they’re going to take some heat for paying up relative to where Marvel shares were trading.

Disney Chief Financial Officer Thomas Staggs said Marvel was in a "strong financial position. This is not a deal that they had to do. ... So we are acquiring a premium company, a premium set of assets, and for that I think you have to pay a full and fair price."

Disney shares were down 73 cents, or 2.7%, to $26.11 at about 12:30 p.m. PST, trimming their year-to-date gain to 15%.

Marvel shares were up $9.74, or 25%, to $48.39, just slightly below the $49.45-a-share value of the deal given the slide in Disney’s stock today.

If Wall Street believed that some Marvel shareholders might pressure Disney for a higher bid, the stock would be trading above the deal’s value today.

Also note that Marvel CEO Ike Perlmutter owns about 37% of the stock, which helps to lock up the deal as agreed.

-- Tom Petruno

Image: Iron Man. Credit: Marvel Entertainment

Comments

[sam]

Should not be allowed to happen. Talk about a MONOPOLY? What do you think will happen now. disney (lower case int), will proceed to have theater prices raised where ever their animated movies show. They will say no, OF COURSE. Just wait. I for one do not watch disney movies.

[anon]

The headline should read:

"Disney Buys Comic-Con"

Essentially, they're buying the right to move all those film, video, book, and merchandising releases (and attendant hype) that Marvel has at Comic-Con and take thoe releases (and hype) to Disney's own convention, "D23" which will be held for the first time this September.

No more premieres and releases of Marvel anything at Comic-Con without the permission of Papa Mouse.

Now Comic-Heads from around the world will have to decide:
San Diego in July? or Anaheim in September?
Only so much vacation money and vacation time to use.

Disney will now get to control the show.

Corporate wins again.

Or, as Kent Brockman said (sort of):

"And I, for one, welcome our new rodent overlords. I’d like to remind them that as a trusted TV personality, I can be helpful in rounding up others to…toil in their underground cheese caves."

[ohwilleke]

If you segregate the comic book business from everything else, Marvel has one of the highest margins in the publishing business, bar none; most of the publisher on the NYT best seller list would sacrifice their first children to get those kinds of margins. If you add in the gravy of character and story licensing for movies and toys that flow from the publishing itself, it is immensely rich relative to the costs. This is a rare business that has genuine profits, not just revenues and a dream to back it up.

Also, the comic industry has a record of being recession-proof. It largely came into being in the Great Depression. And, while prices of a lot of consumer goods have fallen with greater technological efficiency and foreign competition, movie tickets and comic books very close to what they cost in inflation adjusted terms in the 1930s.

The part Marvel owns (the rights to the characters and stories) can't be outsourced, even though the labor can be (two recent graphic novels I've seen had foreign illustrators, one featuring Chicago settings used an Indonesian illustrator, another a Phillipino illustrator). Meanwhile, Marvel has somehow managed to avoid the creative talent pay surge that exists in Japan, where many of the highest paid people in the country are comic writers. Marvel's creative people aren't hungry, but they aren't making what business chiefs and stockbrokers and pro-sports and film celebrities do.

When you add in the fact that Disney is better positioned than anyone else in the market to cross-sell Marvel characters and stories (in products, on radio, on TV and in amusement parks), you can see why it would want to buy the property. And, the monopoly implications are real too. Disney is the dominant player in the youth entertainment market and that makes any competitor's job harder.

It is hard to see the price they are paying as too much.

[Jack Meoph]

Yeah, I know they have the smart money guys making a$$e$$ments on what the total value of the package of the deal is, but come on. Where do they pull $4 billion from? Why not $3.97 billion, or $3.63 billion? Where is the line item spread sheet? If Dr. Doom is worth $350 thousand does that mean that The Lizard is worth $100 thousand? Do they pull these numbers from the black hole of Uranus? I think they do.

[chris]

Honestly its gotten to the point where i don't even care. Comic heroes aren't what they use to be anyway. I think we should just give up on trying to reason with either side, they only care about cash.