Comcast Makes Surprise Bid to Buy Disney
As part of the proposal, Comcast has noted the applicability of the FCC's current program access and program carriage rules to the combined company, which should address potential concerns that could be raised in the regulatory process. Those rules ensure that the combined company will continue to make all of its satellite-delivered national and regional cable networks available on a non-exclusive, non-discriminatory basis and that there will be no discrimination against unaffiliated programming services, all comparable to the undertakings made by News Corp. in its recent acquisition of DirecTV.
The excellent track record of Comcast's management is shown by its success in the acquisition of AT&T Broadband, which was twice the size of Comcast when acquired 15 months ago. Performance of the merged company has far exceeded initial margin improvement expectations. The combination has resulted in immediate reversal of basic subscriber loss and acceleration of system upgrades, as well as significant launches of new products and services such as video-on-demand and HDTV.
Comcast is being advised by Morgan Stanley, JPMorgan, Quadrangle Group and Rohatyn Associates. Davis Polk & Wardwell is the legal advisor to Comcast.
Comcast Corporation (www.comcast.com) is principally involved in the development, management and operation of broadband cable networks and in the provision of programming content. The company is the largest cable company in the United States, serving more than 21 million cable subscribers. The Company's content businesses include majority ownership of Comcast Spectacor, Comcast SportsNet, E! Ent. Television, Style, The Golf Channel, Outdoor Life Network and G4.
Here is the full text of Comcast's letter sent to Disney:
February 11, 2004
Mr. Michael D. Eisner
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521
I am writing following our conversation earlier this week in which I proposed that we enter into discussions to merge Disney and Comcast to create a premier entertainment and communications company. It is unfortunate that you are not willing to do so. Given this, the only way for us to proceed is to make a public proposal directly to you and your Board.
We have a wonderful opportunity to create a company that combines distribution and content in a way that is far stronger and more valuable than either Disney or Comcast can be standing alone. To this end, we are proposing a tax-free stock for stock merger in which Comcast would issue 0.78 of a share of its Class A voting common stock for each share of Disney. This represents a premium of over $5 billion for your shareholders, based on yesterday's closing prices. Under our proposal, your shareholders would own approximately 42% of the combined company.
The combined company would be uniquely positioned to take advantage of an extraordinary collection of assets. Together, we would unite the country's premier cable provider with Disney's leading filmed entertainment, media networks and theme park properties. In addition to serving over 21 million cable subscribers, Comcast is also the country's largest high speed internet service provider with over 5 million subscribers. As you have expressed on several occasions, one of Disney's top priorities involves the aggressive pursuit of technological innovation that enhances how Disney's content is created and delivered. We believe this combination helps accelerate the realization of that goal-whether through existing distribution channels and technologies such as video-on-demand and broadband video streaming or through emerging technologies still in development-to the benefit of all our shareholders, customers and employees.
We believe that improvements in operating performance, business creation opportunities and other combination benefits will generate enormous value for the shareholders of both companies. Together, as an integrated distribution and content company, we will be best positioned to meet our respective competitive challenges.