Disney Deal with Pixar is Likely - But Not a Merger, Analysts Say

  LOS ANGELES (AP) - The more time that passes without a new distribution deal between The Walt Disney Co. and Pixar Animation Studios, the greater the speculation, including a theory that Disney is angling to buy Pixar and install its CEO Steve Jobs as Disney's chairman. Analysts believe a new distribution deal is likely – and soon. But they dismiss the notion that Disney would buy Pixar. An outright purchase would be too expensive, analysts say, and would not be wise for either company in the long term. Still, guessing the terms of a deal has become a bit of a sport on Wall Street, with speculation pushing Pixar shares higher in recent days. Most analysts who cover both companies believe Pixar will soon announce a new deal that has Disney distributing its highly popular – and profitable – animated films. Renewed speculation about a deal helped drive up shares of Pixar nearly 8 percent to $58.16 last Wednesday. Another possible trigger for the sudden jump was the expansion of an earlier deal between Disney and Jobs' other company, Apple Computer Inc., to provide more entertainment for download on Apple's iPod. Shares dropped back to $56 the next day and have been trading around that price since. "Something has to happen soon," Marla Backer, an analyst at Research Associates Llc, wrote in a recent report. The current Disney-Pixar deal expires with the June 9 release of "Cars." Marketing plans for Pixar's 2007 release, tentatively titled "Ratatouille," must be made soon. The most likely reason for the delay is that a new deal with Disney is complex, despite the mutual respect that has developed between Jobs and Disney CEO Robert Iger. Animosity between Jobs and former Disney CEO Michael Eisner led to the two sides breaking off talks in 2004. "There are a lot of moving parts here," said David Miller, an analyst with Sanders Morris Harris. "It's not as simple as slapping together an extension of the current agreement."

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