Disney buying Pixar for $7.4 billion

updated 11:13 a.m. ET Jan. 25, 2006

LOS ANGELES - The Walt Disney Co. said Tuesday it is buying longtime partner Pixar Animation Studios Inc. for $7.4 billion in stock in a deal that could restore Disney’s clout in animation while vaulting Pixar CEO Steve Jobs into a powerful role at the media conglomerate.

Disney’s purchase of the maker of the blockbuster films “Toy Story” and “Finding Nemo” would make Jobs Disney’s largest shareholder. Jobs, who owns more than half of Pixar’s shares and also heads Apple Computer Inc., will become a Disney director.

“With this transaction, we welcome and embrace Pixar’s unique culture, which for two decades, has fostered some of the most innovative and successful films in history,” Disney Chief Executive Robert A. Iger said in a statement.

Disney has co-financed and distributed Pixar’s animated films for the past 12 years, splitting the profits. That deal expires in June after Pixar delivers “Cars,” and it had once appeared the companies would not renew it amid friction between Jobs and former Disney CEO Michael Eisner.

But the talks revived under Iger, who became Disney CEO last October. Disney, the theme park owner that also owns the ABC and ESPN TV networks, and Pixar had discussed a new relationship for months.

Pixar Executive Vice President John Lasseter will become chief creative officer of the animation studios and principal creative adviser at Walt Disney Imagineering, which designs and builds the company’s theme parks.

Lasseter began his career as a Disney animator and is the creative force behind Pixar’s films. He will report directly to Iger.

Pixar President Ed Catmull will serve as president of the combined Pixar and Disney animation studios, reporting to Iger and Dick Cook, chairman of The Walt Disney Studios.

The two companies will remain separate, with Pixar keeping its brand name and headquarters in Emeryville, near San Francisco. Maintaining Pixar’s unique creative character was a priority in the talks, executives said.

“Most of the time that Bob and I have spent talking about this hasn’t been about economics, it’s been about preserving the Pixar culture because we all know that that’s the thing that is going to determine the success here in the long run,” Jobs said on a conference call with analysts.

Under the deal, Burbank-based Disney said it will issue 2.3 shares for each share of Pixar stock. At Tuesday’s closing price of $25.99 for Disney, Pixar shareholders would get stock worth $59.78, a 4 percent premium over Pixar’s closing price of $57.57. The deal was announced after the markets closed for the day. Pixar gained 2.5 percent to $59 in after-hours trading, while Disney fell 14 cents.

Disney said the deal would lower earnings over the next two years, but that the deal would add to earnings by 2008.

“It’s something Disney had to do,” said Harold Vogel, a media analyst with Vogel Capital Management in New York. “It’s good for both companies.”

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