Mickey, Iron Man Boost August Deals

Disney's purchase of Marvel is one of two transactions that give a last-day bump to this month's M&A activity.
Sarah JohnsonAugust 31, 2009

Two large corporate purchases nudged the semiconscious mergers-and-acquisitions market on the last day of August.

The $5.5 billion merger of oilfield-services company Baker Hughes with BJ Services, and Walt Disney’s $4 billion acquisition of Marvel Entertainment, put M&A activity at $23.4 billion for August. Even with the two big deals, it was the lowest total since the $23.2 billion registered last November, according to Thomson Reuters.

Expected to be completed by year-end, Disney’s stock-and-cash purchase will put more than 5,000 comic-book characters under its roof. The likes of Iron Man, X-Men, Captain America, and the Incredible Hulk will now rub ears with another superhero of sorts, Mickey Mouse.

During a conference call, Disney executives touted the acquisition as a strategic move, and in fact CEO Robert Iger said it was not a “must-do deal.” But it gives access to the licensing opportunity that Marvel’s character library brings through movies, toys, games, and so on.

Disney CFO Thomas Staggs said the decision to buy Marvel “was not principally driven by cost savings,” although there will be some redundancies when the deal is complete. He has concluded that the deal will positively affect Disney’s earnings per share starting in 2012.

Under the agreement, Disney will pay Marvel’s shareholders $30 per share in cash and give them approximately 0.745 Disney shares for each Marvel share they own. In other words, Disney plans to pay $50 per Marvel share. And the company plans to repurchase at least as many shares as it issues within the next 12 months, Staggs promised.

Disney executives demurred when asked what the specific impact will be on Marvel’s business partnerships. However, they have not ruled out completely taking control of films with Marvel characters when the existing partnerships run out. Paramount is scheduled to handle five more pictures for Marvel. “It would clearly be in our best interest and more attractive if over time we ended up as the sole distributor,” said Iger.

Marvel has used third parties to distribute some of its films, such as “Spider-Man 3” and “Fantastic Four 2,” and has also independently produced movies, such as “Iron Man.”

While Disney is acquiring Marvel’s well-known brands — including hundreds of relatively unknown characters — executives said they do plan to keep the Marvel name and its creative team.

As for the other large deal announced Monday, Baker Hughes will give BJ Services’s shareholders 0.40035 shares of its common stock and $2.69 in cash for each of their BJ Services shares. Baker Hughes expects to save approximately $75 million in 2010 and $150 million in 2011 by cutting redundant costs, consolidating facilities, and rationalizing field costs, and it expects the deal to be accretive to earnings per share in 2011. “The proposed merger will make Baker Hughes a stronger, more efficient service provider for our customers worldwide,” says Baker Hughes chairman Chad Deaton.


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