Disney To Comcast: You're Goofy

Less than a week after Comcast Corp. made its surprise $48 billion bid for The Walt Disney Co., the Magic Kingdom's board of directors formally turned it down, but left the door open for a sweeter offer.

In a statement released late Monday, Disney said the board unanimously turned down Comcast's proposal, which would trade each Disney share for 0.78 Comcast shares. Disney said the proposal was $3.60 less a share than its current market price, or $6.6 billion total. When Comcast announced its plans Wednesday, Disney's shares rose on the New York Stock Exchange as Comcast's fell slightly on the Nasdaq.

While closing the door on Comcast's initial bid, Disney's board didn't lock it. It said that, in the interest of shareholder value, Disney would consider any "legitimate" proposal.

"In any proposal by Comcast, or any other company, the board will consider and assess the value to be received in exchange for the shares of Disney, and also the appropriate premium to reflect the full value of Disney," the board stated.

In response, Comcast issued a statement that described its valuation of Disney as "generous," implying that it might stand pat on its original offer. However, it did not overtly rule out a sweeter deal.

"Our proposal to acquire The Walt Disney Company reflects a full and generous valuation based upon Disney's prospects and performance over a long period of time, representing a significant premium over Disney's unaffected share price during any relevant measurement period over the last three years," stated Comcast, adding, "We maintain the belief that our merger proposal represents a sound and compelling proposition for both sets of shareholders." Comcast's plan would have been a stock-for-stock transaction in which Disney's shareholders would at its completion own about 40 percent of the combined company. No cash would be exchanged in Comcast's initial bid, although that could change. Almost immediately, analysts said that Comcast would have to offer more if it was to acquire the Magic Kingdom. Comcast has been officially silent since laying out its case Wednesday in a conference call with Wall Street analysts and a news conference with journalists.

Disney was initially flummoxed by the move by Comcast, which had been rebuffed by Disney Chairman and Chief Executive Michael Eisner on Monday when Comcast Chief Executive Brian Roberts had suggested a merger. Comcast didn't retreat, going public with the bid on the same day Comcast and Disney announced quarterly earnings.

It's not the only controversy for Disney or Eisner, who is in the middle of a public disagreement over the course of the company with two former directors, including Walt Disney nephew Roy Disney. Institutional Shareholder Services last week advised shareholders to dump Eisner from the Disney board of directors, and therefore leadership of Disney.

Things were expected to come to a head March 3, when Disney holds its annual meeting in Philadelphia. The City of Brotherly Love is also Comcast's headquarters.

In its statement Monday night, the board reaffirmed Eisner's leadership and the current management team. It follows a two-day conference at Disney World in Orlando, Fla. last week designed to bolster investors' confidence in the company's recovery efforts--which became a forum for Disney to tell the world. The board said that it expected Disney's efforts would be successful.

"The interests of Disney shareholders, which represent the fundamental priority of the board, would not be served by accepting any acquisition proposal that does not reflect fully Disney's intrinsic value and earnings prospects," the board said.

The stock markets were closed Monday for the President's Day holiday. At the beginning of trading Tuesday on the NYSE, Disney's stock stood at $26.92 a share, down $1.08 from Tuesday's close but still about $3 higher than Comcast's bid that valued Disney at $23 a share.

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