Disney To Acquire CapCities/ABC in $19 Billion Merger
STEVEN P. ROSENFELD
Jul. 31, 1995
NEW YORK (AP) _ The Walt Disney Co. will acquire Capital Cities/ABC Inc. in a surprise merger of entertainment giants valued at about $19 billion, the companies announced today.
Under the agreement, New York-based Capital Cities, which owns the ABC television network, will become a subsidiary of Burbank, Calif.-based Disney, which produces ABC's hit comedy series, ``Home Improvement.''
The combined company will be called The Walt Disney Co., with Disney's chairman, Michael D. Eisner, a former entertainment president at ABC, continuing at chairman and chief executive.
Disney is best known for cartoon characters like Mickey Mouse, animated movies like ``The Lion King'' and ``Pocahontas,'' and its Disney World and Disneyland theme parks.
The company, which also has interests in parks in Japan and Europe, operates the Disney Channel on cable television. It has 400 Disney Stores and licenses its characters to manufacturers. Disney also publishes books, magazines and music.
In addition to ABC TV, Capital Cities has a network of 225 affiliated stations and owns eight TV stations. It plans to acquire two more in August.
It also owns 80 percent of sports cable broadcaster ESPN Inc., has interests in the Lifetime Television and A&E Television Networks cable channels, and has 21 radio stations. It also publishes newspapers, shopping guides, magazines and books, and has interests in international broadcasting.
The acquisition, already approved by the boards of both companies, is subject to shareholder approval and federal antitrust review. The companies said they expected the deal to be concluded by early 1996.
Because the businesses are complementary, the companies said they do not expect jobs will be lost in the combination.
Under the proposal, Capital Cities shareholders would receive one share of Disney stock and $65 in cash for each of their shares.
At the close of trading Friday, Disney stock was at $57.37 1/2 a share and Capital Cities at $96.12 1/2. The deal would value Capital Cities at $122.37 1/2 a share.
The companies had combined annual revenues of about $16.5 billion in 1994.
The announcement comes at a time of consolidation in the media industry.
There have been reports for weeks speculating that Westinghouse Electric Corp. is putting together a $5 billion bid to buy CBS Inc.
Recently, Viacom Inc. agreed to sell its local cable television operating systems to Tele-Communications Inc. in a deal valued at $2.25 billion. Gannett Co., the nation's leading newspaper publisher, announced it is acquiring Multimedia Inc., a publisher and producer of talk shows, for more than $1.7 billion.
Eisner said the deal ``is a once-in-a-lifetime opportunity to create an outstanding entertainment and media company.''
``Disney and Capital Cities/ABC have created some of the most recognized and respected brands in the world,'' said a joint statement by Eisner and Thomas S. Murphy, chairman of Capital Cities. ``The merger will create tremendous value for the shareholders of each company by taking full advantage of the complementary strengths of each organization.''
Murphy will relinquish his titles of chairman and CEO when the merger takes effect and join the Disney board. Robert A. Iger would remain as president of Capital Cities/ABC.
Eisner, appearing with Murphy this morning on ABC's ``Good Morning America,'' said the deal fell together a week ago Thursday at an Idaho resort.
``I literally passed Tom Murphy in Sun Valley on the street ... and said, `Tom, I think the time is right now. Every part of your company is working. Every part of our company is working.
``There are no fires in any divisions. Disneyland in Paris is doing great. They're No. 1 in prime time. Maybe now is the time,''' said Eisner. ``He simply looked at me and said OK.''
Murphy said, ``We're not putting two television networks together or two movie studios together or two theme parks together. We're in allied fields but we're in different fields.
``I don't think there's any domination of the media or any part of the media so that we would be damaging competition at all,'' he said.