Disney to Acquire Pixar for $7.4B in Stock

It's official.

LOS ANGELES (AP) – The Walt Disney Co.'s purchase of Pixar Animation Studios Inc. allows Disney to inject new creative life into its animation efforts, while Pixar can end its public run at the top of its game. However, it remains to be seen whether the $7.4 billion price tag is justified – not to mention the fate of Pixar's unique corporate culture once ensconced in a massive media conglomerate. Executives from both companies said preserving Pixar as a separate entity was a top priority, even as Disney hopes some of Pixar's creative power rubs off on its own animation efforts. "I think this is great for Disney, not only to have Pixar be part of the company, but to have Pixar influence the company," Disney Chief Executive Robert A. Iger told The Associated Press in an interview Tuesday after the deal was announced. "It's also possible we'll look at Pixar and see not only how well it's run but how well it lives and seek to overlay that influence on some of our other businesses." Disney is buying longtime partner Pixar for $7.4 billion in stock. The deal will put Pixar CEO Steve Jobs in a powerful new role at Disney and makes the billionaire its largest individual shareholder, with a stake of about 7 percent. Jobs, who owns more than half of Pixar's shares and heads Apple Computer Inc., will become a Disney director. Key to spreading Pixar's influence will be Pixar President Ed Catmull, who will serve as president of the new combined Pixar and Disney animation studios, and Pixar Executive Vice President John Lasseter, who becomes chief creative officer of the animation studios and principal creative adviser at Walt Disney Imagineering. Lasseter has been compared to Walt Disney by many, including Eisner. Lasseter began his career as a Disney anima-tor and is the creative force behind Pixar's films. One immediate sign of Lasseter's influence is that plans for Disney to make the long rumored sequel "Toy Story 3" on its own have been scrapped. If the film is made, it will be done by Lasseter and the other creators of the original film, the companies said.

The deal may make creative sense, but the company could face a hurdle convincing investors it makes financial sense. Under the deal, Disney said it will issue 2.3 shares for each share of Pixar stock. At Tuesday's closing price of $25.99 for Disney, Pixar shareholders would get stock worth $59.78, a 4 per-cent premium over Pixar's closing price of $57.57. Disney said the deal would lower earnings over the next two years, but that Pixar will help increase earnings by 2008.The companies still need to reveal what Pixar's next films will be and provide more detail on how the combined entity will function, said Richard Greenfield, an analyst at Pali Research. "The question remains whether the price/value relationship is going to bear fruit for Disney," Greenfield said Tuesday. With Jobs, Disney also tightens its link with Apple Computer, the innovative technology company behind music and video iPods. And Jobs is likely to press Iger to further his plans to marry films, TV shows, video games and other content to computers, iPods, handheld game consoles and even cell phones.