Disney to buy Toy Story partner in €6.1bn deal

The Walt Disney Company is buying long-time partner Pixar Animation Studios, which made blockbuster films Toy Story and Finding Nemo.

The $7.4bn (€6.1bn) stock deal could restore Disney’s clout in animation while vaulting Pixar chief executive Steve Jobs into a powerful role at the media conglomerate.

Disney’s purchase would make Jobs Disney’s largest shareholder. Jobs, who owns more than half of Pixar’s shares and also heads Apple Computer, will also join Disney’s board.

“With this transaction, we welcome and embrace Pixar’s unique culture, which for two decades, has fostered some of the most innovative and successful films in history,” Disney chief executive Robert Iger said.

Disney has co-financed and distributed Pixar’s animated films for the past 12 years, splitting the profits. That deal expires in June after Pixar delivers Cars and it had once appeared the companies would not renew it amid friction between Jobs and former Disney chief Michael Eisner. But the talks revived under Iger, who became Disney CEO last October.

Disney, the theme park owner that also owns the ABC and ESPN TV networks, and Pixar had talked for months about a new relationship.

Pixar executive vice president John Lasseter will become chief creative officer of the animation studios and principal creative adviser at Walt Disney Imagineering, which designs and builds the company’s theme parks.

Lasseter began his career as a Disney animator and is the creative force behind Pixar’s films. He will report directly to Iger.

Pixar president Ed Catmull will serve as president of the new combined Pixar and Disney animation studios, reporting to Iger and Dick Cook, chairman of The Walt Disney Studios.

The two companies will remain separate, with Pixar staying in Emeryville, California, and retaining its brand name. Maintaining Pixar’s unique creative character was a priority in the talks, executives said.

“Most of the time that Bob and I have spent talking about this hasn’t been about economics, it’s been about preserving the Pixar culture because we all know that that’s the thing that is going to determine the success here in the long run,” Jobs said.

Under the deal, Disney says it will issue 2.3 shares for each share of Pixar stock. At yesterday’s closing price of 25.99 dollars for Disney, Pixar shareholders would get stock worth 59.78 dollars, a 4% premium over Pixar’s closing price of 57.57 dollars. The deal was announced after the markets closed for the day.

Disney said the deal would lower earnings over the next two years, but would add to earnings by 2008.

“It something Disney had to do,” said Harold Vogel, a media analyst with Vogel Capital Management in New York. “It’s good for both companies.”

The deal received the blessing of Roy Disney, nephew of company founder Walt Disney and a former board member who once also oversaw animation at the company.

Roy Disney and former board member Stanley Gold led a shareholder revolt against the company in part over what they saw as a deterioration of the relationship between Pixar and Disney under the reign of Eisner.

“Animation has always been the heart and soul of the Walt Disney Company and it is wonderful to see Bob Iger and the company embrace that heritage by bringing the outstanding animation talent of the Pixar team back into the fold,” Roy Disney said.

With Pixar, Disney gains a company that has produced a long-running string of animated blockbusters.

Iger wants to strengthen Disney’s animated features, the hallmark of the company since its founding and a steady source of characters for Disney’s theme parks and other units.

Pixar has served as Disney’s de facto animation unit for a decade. Two Pixar movies, Finding Nemo and The Incredibles, have won Academy Awards for best animated feature film.

Pixar films have also been a financial windfall for Disney, which receives 60% of the profits.

By contrast, Disney’s own animation unit has struggled, producing some modest successes, such as 2002’s Lilo & Stitch, and many flops, including Treasure Planet and Home On The Range.