Comcast facing uphill battle to buy Disney

Comcast Corporation astounded the financial world with its offer to buy The Walt Disney Company, yet the cable television giant now faces a daunting task in selling the blockbuster combination – and investors have already indicated the proposed price is too low.

Analysts said Disney board members and the financial community were both looking for extremely sound reasons, beyond financial and management abilities, why Comcast believed the acquisition would work.

“While there could be merits in combining content with distribution, we do not believe these are overwhelming,” Jill Krutik, an analyst at Citigroup Smith Barney said.

Two days of meetings between Disney executives and financial analysts at Walt Disney World are likely to reinforce the idea that Disney is on the right track and that Comcast management have yet to offer enough specifics on what they would do differently, some analysts said.

“Looking closely, the numbers aren’t there,” said Harold Vogel of Vogel Capital Management, who is attending the analyst meeting.

Vogel said Disney managers were making progress toward key goals, including improving the ratings at its ABC Television network.

Combining content, such as Disney’s ESPN network, with distribution, like Comcast’s cable subscribers and high-speed Internet customers, could make sense, but Disney has shown it is able to find customers for its content without owning its own cable system or satellite television network.

Disney executives are saying little about the offer, but have begun to outline its plans for boosting the company’s earnings by double digits each year through 2007.

Chief executive Michael Eisner said the Disney board met yesterday and asked management to perform an in-depth analysis of the proposal so the board could evaluate it. Eisner did not say how long the analysis would take.

Disney also released strong first quarter earnings yesterday, which executives said was evidence that decisions made over the past few years by management were paying off.

The controversy over Eisner’s leadership is not likely to disappear, however, as Comcast is expected to sweeten its offer and ex-Disney board members Stanley Gold and Roy Disney continue their fight to oust Eisner.

Under the merger plan, Comcast said it would issue 0.78 of a share of its Class A stock for each Disney share, and Disney shareholders would retain 42% of the combined company. The offer valued each Disney share at 26.49, a 10% premium over their closing price on Tuesday.