Walt Disney boosts its appeal to boys with $4bn deal to buy Marvel
Walt Disney has agreed to buy Marvel Entertainment for $4bn in the year's biggest media deal, broadening its line-up of movie franchises that appeal to boys.
Disney adds Spider Man, Iron Man and Thor to its roster of classic characters like Mickey Mouse and Snow White and will feature the super-heroes in movies, before rolling out associated theme park rides, TV shows and merchandise.
But the deal comes at a tough time in the entertainment business, with advertisers avoiding spending on new campaigns and consumers cutting back on everything from DVDs to travel.
The deal is also expensive. It values Marvel at 37 times estimated 2009 earnings, offering shareholders a 29pc premium to Friday's closing price.
Standard & Poor's reacted by placing Disney's credit rating on its negative watchlist, saying it may need to issue new debt even as earnings stagnate or fall in the recession.
It should not have come as a surprise, then, that shares in Disney, which is set to acquire ownership of more than 5,000 Marvel characters, fell 3pc to $26.04 on news of the acquisition yesterday.
But even so, analysts remain bullish. "This helps give Disney more important exposure to the young male demographic that they have sort of lost some ground with in recent years," said David Joyce at Miller Tabak & Co.
Disney has long been a blockbuster brand with girls, thanks to characters such as Hannah Montana, Cinderella and Snow White, but has struggled to achieve the same kind of success with boys.
Movies including 'Iron Man 2', the sequel to the smash hit about a billionaire playboy with a high-tech suit of armour due to hit theatres in 2010, or 2011's 'Spider-Man 4' and 'Avengers' should help resolve that issue. Disney will also be able to use its marketing and entertainment clout to promote and build characters such as Thor in ways that Marvel never could.
The deal has been some time in the making.
"We at Disney had admired them because of their position and asset base," Disney chief financial officer Tom Staggs said yesterday.
"With conversations over time, we came to believe in the value of a combination."
Disney says the purchase is expected to close by year-end, but will not add to Disney earnings until 2012 and beyond.
However, not everyone agrees. Caris & Co analyst David Miller said Disney was "sandbagging a little" by estimating that the deal would not add to its earnings for another two years.
"They said the same thing with the Pixar deal," said Mr Miller, who has "above average" ratings on both Disney and Marvel.
"They will make it accretive a lot sooner. They are under promising, as they always do."
As to the Disney fans, Stan Lee, the co-creator of Spider-Man and chairman emeritus of Marvel, says there is no reason to worry. "To me, becoming 'Disneyfied' is not a bad thing. I mean look at movies like 'Pirates of the Caribbean'. Disney knows how to do movies."
- Pat Boyle
