Disney to Buy Pixar in $7.4 Billion Deal

The Walt Disney Company is purchasing longtime partner Pixar Animation for $7.4 billion in stock. The buy is an effort to shore-up Disney's faltering reputation as a leader in animated films. Pixar CEO Steve Jobs will be Disney's largest single shareholder and have a seat on the board.

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Walt Disney is buying long-time partner Pixar Animation. The agreement will put Pixar CEO, Steve Jobs, into the Disney board. While analysts are happy with the move, they have a word of caution.

As NPR's Laura Sydell reports.

LAURA SYDELL reporting:

The last time Disney had an enormous hit was more than a decade ago.

(Soundbite of the Lion King)

SYDELL: The Lion King in 1994 was a high point for the company. Since then, Disney's had failures, and its most recent release, Chicken Little,' was only a modest success. Compare that with what Pixar has brought to the screen.

(Soundbite of music)

SYDELL: Finding Nemo won the Academy Award and so did The Incredibles. In announcing the deal, Disney's CEO, Robert Iger, made clear it was a move to make sure that great animation remains Disney's hallmark. Iger spoke on CNBC.

Mr. ROBERT IGER (CEO, Disney): The most important thing for the company to do is to create high quality content, and within that sort of strategic imperative, is to make sure that animation is healthy at the company.

SYDELL: For more than a decade, Disney has had a relationship with Pixar, and as the distributor of its movies, reaped a percentage of the profits. But under Michael Eisner, Iger's predecessor at Disney, the relationship between the two companies became strained. Eisner and Pixar CEO, Steve Jobs, didn't get along. Wall Street analysts seemed pleased that the two companies are patching things up. Robert Ralph of Jeffries and Company says the upfront price is high, but in the long run, the purchase is good for Disney.

Mr. ROBERT RALPH (Analyst, Jeffries and Company): I think it shows that Bob Iger really has his eye on the ball, he has a vision, and he's going to take action and do whatever he can to get Disney back to the place that it once occupied.

SYDELL: Disney is buying Pixar for $7.4 billion in stock. Under the deal, Pixar stockholders will get 2.3 shares of Disney for every share they own of Pixar. Jeffrey Young is co-author of iCon Steve Jobs, a biography of Pixar's CEO. Young believes that by making this deal, Jobs is giving the many talented people at Pixar more opportunities to put out movies and be part of other facets of Disney.

Mr. JEFFREY YOUNG (co-Author, iCon Steve Jobs): Pixar was basically subsisting on one movie a year, and, you know, there was no future for these guys. So, here he has given them all a fresh start and a blank canvas to work on.

SYDELL: Steve Jobs will be Disney's largest single shareholder and have a seat on the board. Young and others think this will give Disney an edge over other media giants in the face of new technologies. To his new position, Jobs brings his track record at Apple Computer and recent successes with the iPod and the iTunes store. But there could also be some rough times ahead. Steve Jobs is known as a forceful personality, who doesn't like to compromise his vision. Josh Bernoff is analyst with Forrester Research.

Mr. JOSH BERNOFF (Analyst, Forrester Research): You have somebody who's basically living in the future who is willing to take big risks on the board of directors of a company that has a very steady business and is not known for taking big risks. So it's possible that things won't work out.

SYDELL: There are also some concerns that Disney might try to squelch the independent cultured Pixar, which is located far from Hollywood in the San Francisco Bay area. But John Lassiter, the man behind Pixar's string of hits, will remain the studio's chief creative officer. Jobs said on a conference call, no one wants to tamper with a winning formula.

Mr. STEVE JOBS (CEO, Pixar Animation Studios): Because we all know that that's the thing that's going to determine the success here in the long run. And I think we've really thought this through pretty well.

SYDELL: Pixar will keep its separate headquarters in Emeryville, California, and there are no signs that Mickey Mouse will be greeting visitors at the front gate.

Laura Sydell, NPR News, San Francisco.

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