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Disney's $300 Million Showdown - The 1984 Disney Hostile Takeover Attempt Part 4 - YouTube
Channel: Midway to Main Street
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Disney was in trouble.
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In order to scare away corporate raider Saul
Steinberg from a hostile takeover attempt,
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they spent $200 million in newly issued Disney
stock to acquire Arvida, a real estate company
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they honestly didnât need.
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The hope was that Steinbergâs investment
in Disney would be diluted enough to make
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it not worth his while anymore.
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Instead, he used the move as justification
to go all-in on the takeover attempt, pointing
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to the acquisition as the perfect example of
Disneyâs poor management.
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Everybody knew he was a corporate raider preparing
to make a quick buck off of a company that
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was struggling, but he tried to spin it as
him being the benevolent Wall Street investor
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who was going to save Disney from itself,
regardless of whether Disney wanted the help or not.
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Disney had to act fast.
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Disney began to scramble for a solution, and
with time running out, they became more open
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to different ideas.
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One that they briefly considered was merging
with another large company that was also a
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potential takeover target, figuring that once
combined, theyâd be untouchable.
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They held discussions with the Bally Manufacturing
Corporation which was known for their pinball
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machines and, at that point, their new Atlantic
City casino.
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They also spoke with Binney and Smith, famous
for their Crayola crayons.
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In both cases the talks were short and uneventful,
with all parties admitting that they were
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a bad fit for each other.
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However another name that was thrown around
did manage to pique Disneyâs interest: Gibson
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Greetings, the greeting card company.
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Gibson Greetings dates back to 1850 when a
man named George Gibson emigrated over to
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the United States from Scotland.
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Back then Gibson wasnât in the greeting
card business as much as they were in the
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lithography business, printing everything
from stocks and bonds to business cards and checks.
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Over the following 130 years the company would
grow and expand to the now popular pastime
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of greeting cards, and they would shift from
an independent company to a subsidiary, and
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then back to an independent company again
in 1983.
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Up until that point Disney was licensing out
their characters to third-party companies
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like Hallmark.
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It wasnât a bad deal, but it meant less
revenue since they were splitting it with
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their partner.
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Furthermore, it meant less revenue because
Hallmark had more incentive to focus on products
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with copyrights they owned completely, rather
than the products using characters theyâd
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need to share the revenues with.
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It was the common pro and con of licensing.
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In weighing the idea of buying Gibson, they
considered that the increased visibility that
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plastering their characters all over greeting
cards would result in would, in-turn, benefit
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every other branch of the company, from products
to resorts to films.
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As Disney grew excited at the idea of strengthening
their products division with Gibson, Gibson
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was growing excited at the prospect of having
access to Disneyâs treasure trove of IP.
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They wouldnât be independent any longer,
but theyâd never be short of characters
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or ideas to work with.
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At the very least it was a better fit than
Arvida and Disney, and perhaps thatâs why
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talks of the purchase moved that much faster.
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Just three days after the initial idea of
acquiring Gibson surfaced, Disney met with
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the company and began to talk price.
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Similar to Arvida, the acquisition would be
an all-stock purchase, further diluting Steinbergâs
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stake in Disney.
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Agreeing on a two for one stock swap, Disney
was prepared to offer $307 million in Disney
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shares for the greeting card company.
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It was over $100 million more than what they
paid for Arvida, and the dust from that acquisition
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hadnât even settled yet.
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Meanwhile in New York City, Saul Steinberg
was preparing his takeover attempt.
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Part of that preparation included finding
other like-minded investors who might be willing
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to chip-in on the takeover in return for pieces
of the company or a simple financial return
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on investment.
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A lawyer named Stanley Gold was meeting with
Reliance Holdings, Steinbergâs company,
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to talk about a potential deal.
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The client that Gold represented was interested
in acquiring Disneyâs studio as well as
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all of Disneyâs merchandising rights, and
that client was willing to pay $350 million for it.
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Steinberg felt that the offer was far too
low, considering the value of what that client
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wanted, but promised that heâd entertain
the idea.
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After all there might be value in the partnership
beyond just the money.
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Because, you see, Stanley Goldâs client
was Roy Disney.
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Roy had previously toyed around with the idea
of attempting a leveraged buyout of Walt Disney
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Productions on his own, but had found that
it would be prohibitively expensive and would
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require selling off at least one of the two
Disney resorts.
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He couldnât bring himself to break up the
company just to take it over.
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But with the Arvida acquisition and Steinbergâs
renewed motivation to take it over himself,
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perhaps Roy felt that buying into that takeover
would be making the best out of a bad situation.
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The company would still get split up, but
he would at least get control of the studio
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and watch over what he considered the entire
foundation of the companyâs legacy.
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At the same time that Roy was offering to
buy into Steinbergâs takeover attempt, Disney
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was looking for a way to bring Roy back into
the fold at the company.
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Having a vocal critic, one whose last name
was Disney no less, was not doing them any
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favors, and perhaps getting him to return
would help bring back some stability.
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Simply put, Disney wanted to know what it
would take for Roy to return to the Disney board.
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Roy, worried that he would once again be a
lone opinion in a room of board members against
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him, made the answer just as simple: He wanted
multiple seats at the table so he could bring
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in additional board members who would back
him up in future matters.
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Disney didnât agree right away, but they
agreed to consider it.
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Roy, entertaining both sides of the pending
takeover battle, sat back and waited.
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Shortly after that Disney announced the plans
for the acquisition of Gibson Greetings, and
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as expected, nobody was happy.
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The purchase would dilute Steinbergâs stake,
but then again it would also dilute everybodyâs
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stake, including people like Roy and the newest
major shareholders of the company, the Bass Brothers.
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Not to mention, it once again failed at scaring
Steinberg away, who stated that this second
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acquisition killed any chance of him stepping
down.
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On Friday June 8th Saul Steinberg formed a
shell company called the MM Acquisition Corporation.
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The MM stood for Mickey Mouse.
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The company would collectively pool the investments
that Steinberg gathered to buy Walt Disney Productions.
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Kirk Kerkorian of MGM/United Artists pledged
$75 million in return for the option to buy
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Disneyâs studio, movie library, and the
Disney channel for nearly $450 million.
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That price tag all but assured that Roy Disney
and his $350 million bid wasnât going to
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get a seat at the table.
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Fisher Brothers Financial and Development
Company, a real estate developer also pledged
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$75 million in return for the option to buy
or lease as much as 15,000 acres of Disney
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Worldâs undeveloped land.
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Reliance would keep the theme parks and character
rights.
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The group was also comprised of various other
smaller and larger investors, including another
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corporate raider by the name of Irwin Jacobs,
who committed $35 million to the takeover.
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Maleficent: Now shall you deal with me, oh Prince and all the powers of hell!
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That same day, the MM Acquisition Corporation
announced their tender offer to buy Disney
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stock for $67.50 a share.
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Disney was out of time.
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By that Monday morning, if the larger institutional
investors who owned big portions of Disney
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stock accepted Steinbergâs offer, which
they were likely to do, heâd quickly gain
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the 51% of the company he needed to take it
over.
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Disney contemplated two final desperate measures
that weekend.
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The first was a self-tender.
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The concept of the self-tender is that Disney
would wait until Steinberg purchased the 49%
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of the company that he was initially gunning
for, before tipping over to 51%.
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At that point, Disney would then offer a higher
price to buy out and lock up the remaining
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51% of the company.
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To pay for such an expensive move, theyâd
completely leverage their line of credit.
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As a result, Steinberg would end up the largest and only outside shareholder of a company that
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was then riddled with a projected two billion
dollars of debt.
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Itâs for this reason that the self-tender
was called the poison pill option.
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Disney would, in a sense, defeat Steinberg,
but theyâd be crippling themselves in the process.
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The second final measure was to do the one
thing they were advised against doing from
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the very beginning, which was to pay Steinberg
greenmail to go away.
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It would hurt Disneyâs stock, and as a result
their major investors, including Roy and the
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Bass brothers.
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It would also open up the possibility of another
raider coming right along to try their own takeover.
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But at the very least, Disney would survive to live another day.
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Disney began to prepare both options for their
final showdown with Saul Steinberg.
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At the end of the day, the idea of the self-tender
was too destructive to go through with.
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Former CEO, Card Walker, called the idea un-Disney-like
and unethical.
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So on Monday June 11th 1984, Disneyâs board
would vote to approve the buyback of Saul
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Steinbergâs Disney shares.
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After a short negotiation, Disney would pay
Reliance $297 million for his shares in the company.
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To add insult to injury, they would also pay
Steinberg an additional $28 million to cover
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all of the expenses Steinberg incurred during
the takeover attempt.
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Saul, on the stock premium, would turn a profit
of $31.7 million, and all he had to do was
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look threatening to Disney.
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It was a blow to their stock price, their
reputation, and their standing with other
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shareholders, but Disney was finally free
from Saul Steinberg.
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Left licking their wounds after the Steinberg
debacle, Disney turned their focus towards
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trying to get Roy Disney back onto the Disney
board.
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Negotiations went back and forth, but they
eventually settled on two demands from Roy.
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The first, similar to the initial meeting,
was for three seats at the Disney board, with
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Roy taking the role of vice-chairman.
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The second condition was that both Donn Tatum
and Card Walker had to resign from
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their role in Disneyâs executive committee,
which was a management group that occasionally
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met to discuss the running of the company.
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He wanted to send a message with his return,
that not only was he coming back to play a
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significant role in the future of Walt Disney
Productions, but that the âWhat would Walt
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doâ era that Walker and Tatum championed
was finally over.
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The board reluctantly agreed.
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Roy would return to the board along with Stanley
Gold, his lawyer, and Peter Daily, Royâs
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brother-in-law.
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Roy Disney was back under the Disney umbrella,
and he was ready to make some changes.
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First up: getting rid of this overpriced greeting
card acquisition.
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Roy and Sid Bass, as two of the largest individual
shareholders of the company, were understandably
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against the acquisition because it would dilute
their ownership.
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Furthermore, with Steinberg out of the picture,
it just wasnât necessary anymore.
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To round it all out, because the greenmail
payment had hurt Disneyâs stock, the number
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of shares Disney would have to give Gibson
for the deal increased to the tune of over
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a million extra shares, which in turn upset
shareholders even more.
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Facing a list of reasons for ending it, Disneyâs
chairman, Ray Watson, told Gibson they were
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terminating the deal.
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Watson informed Roy and Sid, who were thrilled.
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Then Ron Miller, Disneyâs CEO, decided that
if the deal was altered it could still work.
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Changing the terms of the sale to a stock
and cash offer, the deal was back on.
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Watson informed Roy and Sid, who were not
thrilled.
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At that same time, Disneyâs stock was hurting.
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Between the planned acquisition of Gibson
Greetings, and the greenmail paid to Saul
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Steinberg, Disney was trading at $47, which
was even less than what it was trading at
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when Saul began his takeover attempt that
March.
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And this time, there was no question as to whether a company like Disney would cave to greenmail.
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After all, they just did.
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Thatâs when Irwin Jacobs, who earlier had
pledged to help Steinberg with his takeover,
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started buying shares in Disney.
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