Disney Goes to Infinity and Beyond with $7.4 Billion Pixar Purchase

Its a done deal: The Walt Disney Co. will acquire Pixar Animation Studios for an all-stock transaction to be completed this summer. Under terms of the agreement, 2.3 Disney shares will be issued for each Pixar share. Based on Pixar's fully diluted shares outstanding, the transaction value is $7.4 billion ($6.3 billion net of Pixar's cash of just above $1 billion).

As a result of the acquisition, Disney is now poised to reclaim its position as animation leader while expanding its global entertainment reach and tightening its ties to Apple Computer via its strong relationship with Apple/Pixar head Steve Jobs.

Pixar president Ed Catmull will serve as president of the combined Pixar and Disney animation studios, reporting to Disney Co. president/ceo Robert Iger and Dick Cook, chairman of The Walt Disney Studios. In addition, Pixar evp John Lasseter will be chief creative officer of the animation studios, as well as principal creative advisor at Walt Disney Imagineering, where he will provide his expertise in the design of new attractions for Disney theme parks around the world, reporting directly to Iger. Pixar chairman and ceo Jobs will be appointed to Disney's board of directors as a non-independent member. With the addition of Jobs, 11 of Disney's 14 directors will be independent. Both Disney and Pixar animation units will retain their current operations and locations.

"With this transaction, we welcome and embrace Pixar's unique culture, which for two decades, has fostered some of the most innovative and successful films in history, Iger said. The talented Pixar team has delivered outstanding animation coupled with compelling stories and enduring characters that have captivated audiences of all ages worldwide and redefined the genre by setting a new standard of excellence. The addition of Pixar significantly enhances Disney animation, which is a critical creative engine for driving growth across our businesses. This investment significantly advances our strategic priorities, which include -- first and foremost -- delivering high-quality, compelling creative content to consumers, the application of new technology and global expansion to drive long-term shareholder value."

"Disney and Pixar can now collaborate without the barriers that come from two different companies with two different sets of shareholders," said Jobs. "Now, everyone can focus on what is most important, creating innovative stories, characters and films that delight millions of people around the world."

"Pixar's culture of collaboration and innovation has its roots in Disney Animation. Our story and production processes are derivatives of the Walt Disney `school' of animated filmmaking," said Dr. Catmull. "Just like the Disney classics, Pixar's films are made for family audiences the world over and, most importantly, for the child in everyone. We can think of nothing better for us than to continue to make great movies with Disney."

The acquisition brings to Disney Pixars talented team, which will be involved in the nurturing and future development of Pixar properties, including potential feature animation sequels, which Disney prepared to make on its own in-house, commencing with a proposed TOY STORY 3 feature.

"For many of us at Pixar, it was the magic of Disney that influenced us to pursue our dreams of becoming animators, artists, storytellers and filmmakers," said Lasseter. "For 20 years we have created our films in the manner inspired by Walt Disney and the great Disney animators great stories and characters in an environment made richer by technical advances. It is exciting to continue in this tradition with Disney, the studio that started it all."

"The wonderfully productive 15-year partnership that exists between Disney and Pixar provides a strong foundation that embodies our collective spirit of creativity and imagination," said Cook. "Under this new, strengthened animation unit, we expect to continue to grow and flourish."

Disney first entered into a feature film agreement with Pixar in 1991, resulting in the release of TOY STORY, which was hailed as an instant classic upon its release in November 1995. In 1997, Disney extended its relationship with Pixar by entering into a co-production agreement, under which Pixar agreed to produce on an exclusive basis five original computer-animated feature films for distribution by Disney. Pixar is currently in production on the final film under that agreement, CARS, directed by Lasseter, to be distributed by Disney on June 9.

The boards of directors of Disney and Pixar have approved the transaction, which is subject to clearance under the Hart-Scott-Rodino Antritrust Improvements Act, certain non-U.S. merger control regulations, and other customary closing conditions. The agreement will require the approval of Pixar's shareholders. Jobs, who owns approximately 50.6% of the outstanding Pixar shares, has agreed to vote a number of shares equal to 40% of the outstanding shares in favor of the transaction.

The Disney board was advised by Goldman, Sachs & Co. and Bear, Stearns & Co. The Pixar board was advised by Credit Suisse.

Separately, the Disney board approved the repurchase of approximately 225 million additional shares, bringing the company's total available authorization to 400 million shares. Since August 2004 through the end of December 2005, Disney has invested nearly $4 billion to purchase nearly 155 million shares. Disney anticipates further significant share repurchases going forward, reflecting Disney's continued commitment to returning value to shareholders over time.

The Walt Disney Co. together with its subsidiaries and affiliates, is a leading diversified international family entertainment and media enterprise with four business segments: media networks, parks and resorts, studio entertainment and consumer products. Disney is a Dow 30 company, had annual revenues of nearly $32 billion in its most recent fiscal year, and a market capitalization of approximately $50 billion as of January 23, 2006.

Pixar Animation Studios (www.pixar.com) combines creative and technical artistry to create original stories in the medium of computer animation. Pixar has created six of the most successful and beloved animated films of all time: TOY STORY, A BUGS LIFE, TOY STORY 2, MONSTERS, INC., FINDING NEMO and THE INCREDIBLES. Pixar has won 18 Academy Awards and its six films have grossed more than $3.2 billion at the worldwide box office to date.

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