đ
Roy Disney Considered Buying Disney & Selling the Parks - YouTube
Channel: Midway to Main Street
[0]
Did you know that at one point in 1984, Roy
E. Disney was considering a takeover of the
[6]
Disney company that included selling off some
of the theme parks?
[13]
Iâll admit, thatâs a pretty melodramatic
statement, but it is true.
[17]
In early 1984 Disney was facing a potential
hostile takeover by a corporate raider,
[22]
and of the many options considered by both
Disney and Roy, one of them included Roy buying
[28]
the company himself and selling parts of it
off.
[31]
This is Saul P. Steinberg.
[34]
He was a corporate raider.
[36]
What he and many other raiders in the 1980s
did was sell junk bonds from their companies.
[40]
They were essentially loans that had a high
risk of defaulting, but a high interest rate.
[45]
Theyâd use these junk bonds to raise money
in the short term, and then use that money
[50]
to buyout other companies.
[52]
Then they would use the profits of the newly
owned company to pay off those loans.
[56]
Disney at that time made for a really appealing
target.
[60]
It was a company with a lot of value in its
properties and assets, including three theme
[65]
parks and a beloved film library that spanned
nearly 50 years.
[69]
Yet at the same time the failings of its current
leadership meant that it wasnât trading
[73]
that well.
[74]
The value was there, but Disney wasnât doing
enough with it.
[77]
Steinberg decided he would be the one to do
something with it, even if that something
[82]
was breaking it apart and selling it off piecemeal.
[85]
So he began to put a takeover in motion.
[88]
Now itâs important to note that a hostile
takeover like this isnât something that
[91]
happens overnight.
[93]
It takes time, and the process typically starts
with the raider buying up a large amount of
[97]
the companyâs stock.
[99]
So when a takeover is happening, the company
is aware and usually has time to try and strategize
[104]
a defense.
[105]
When Disney learned that Steinbergâs company,
Reliance Insurance, was buying up their stock,
[110]
they had to act fast and figure out what to
do.
[113]
While they didnât know what would work and
what would backfire, the options Disney had
[118]
were numerous.
[120]
One option included offering to buy back the
Disney stock from Steinberg at a higher price.
[126]
This practice was called greenmail, and it
was less than ideal because paying greenmail
[130]
usually meant another raider would come right
around the corner to do the same thing.
[135]
Another option would be to, as odd as it sounds,
buy another company.
[141]
Spending a considerable amount of money on
an acquisition of their own would not only
[145]
saddle them with debt, but it would dilute
the value of Disneyâs stock as well.
[150]
In general, it would make Disney a less appealing
target.
[154]
The problem there was⊠well, itâd saddle
them with debt and dilute their stock.
[159]
Disney opted to give this method a shot.
[162]
In May of 1984 Disney would issue $200 million
in new stock in order to buy the Arvida Corporation
[168]
from the Bass Brothers of Texas.
[170]
To the public this was done because Arvida
was a company in the business of developing
[175]
resorts and owned 20,000 acres of land across
Florida, Georgia and California.
[181]
Internally it was a clear attempt at slowing
down Steinberg, and it was a waste of money.
[187]
Disney already knew how to develop resorts,
and most of the 27,000 acres they already
[192]
owned in Florida was still unused.
[194]
They didnât need the company and they didnât
need itâs land.
[197]
Worst of all, it didnât stop Steinberg.
[200]
There was a third option, and that was to
take the public company private again by buying it.
[205]
Disney management consider this as well, but
as they did, someone else was considering it.
[211]
Roy E Disney at this point was no longer a
part of the Disney Company.
[215]
He had resigned from his position years prior.
[218]
Roy felt that the company wasnât evolving
creatively anymore, and instead opted to just
[223]
sit on the Disney board.
[225]
Later, in March of 1984 Roy would resign from
that position as well.
[229]
This time it was to clear himself from any
potential conflict of interest as he and his
[234]
firm, Shamrock Holdings, prepared to act against
Disney in order to unseat itâs leadership
[240]
and right a ship that he had felt sailed astray
years ago.
[244]
Shamrock hired an independent company to conduct
a study on Disney to find out how much it
[249]
was worth, and how much it would cost to buy.
[252]
What they found was that it would cost Roy
over $2 billion to buy Walt Disney Productions.
[258]
He would essentially have to borrow the money
from outside investors, use it to buy the
[262]
company, and then turn around and sell parts
of the company to pay back that loan.
[266]
To him it was a simple choice.
[268]
If he had to sell off a part of the company
it would be the theme parks.
[272]
Growing up with his Uncle Waltâs movies
and working in animation and film himself,
[277]
he saw Disney as a film studio first and foremost.
[281]
It wasnât ideal that he would have to sell
part of the company, but he felt all things
[285]
considered, heâd rather save part of the
company than none of it.
[288]
So he went ahead and started to have investors
lined up for the massive loan he would need
[292]
to take over Disney.
[294]
With all of the planning coming together,
Roy would later learn that he would need to
[298]
put $200 million of his own money up to buy
Walt Disney Productions and he would have
[303]
to sell one of the two resorts to pay back
the loan of over $2 billion.
[308]
In theory he was ready to carve out a piece
of the company to save the rest, but when
[312]
the time came he couldnât bring himself
to do it.
[315]
He couldnât cannibalize what his family
worked so hard to build.
[319]
Ultimately Shamrock Holdings would pass on
the decision.
[323]
So what did happen?
[324]
Well long story short, Disneyâs board ultimately
decided to pay greenmail to Steinberg in return
[330]
for the 4.2 million shares he owned.
[333]
The greenmail would cost Disney over $325
million and it was approved under the condition
[339]
that Disney would make moves to improve their
overall value to prevent other raiders from
[343]
trying to extort greenmail from them later
down the line.
[346]
Roy was asked back onto the board of directors
and helped kick off a drastic shift in leadership.
[352]
Remember that company Arvida that Disney bought?
[355]
Well the Bass brothers would ultimately increase
their stake in Disney up to 25%, which scared
[361]
off other raiders They would also back his
fight to have CEO Ron Miller ousted and replaced
[366]
with new management.
[368]
Under his suggestion and their support, the
board approved the hiring of Frank Wells as
[372]
President of the company and Michael Eisner
as Chairman and CEO.
[377]
So luckily in the end, Roy didnât have to
take over his uncleâs company or sell parts
[381]
of it off.
[382]
But for that short time, amongst all the âwhat
ifsâ and âmaybesâ, there was a possible
[388]
future where a Disney would have owned Disney,
but not Disneyland.
[393]
If you want to learn more about the tumultuous
period in which Disney was almost taken over,
[398]
I highly suggest checking out Storming the
Magic Kingdom by John Taylor.
[402]
You can find a link to it in the description
below.
[405]
Thank you all for watching and have a great
week!
Most Recent Videos:
You can go back to the homepage right here: Homepage