International Islamic University Chittagong

Faculty of Business
Department of business administration

Principles of Finance
FIN-3604
Assignment on
Merger & Acquisition in the temporary world.

(Disney & pixer)

Prepared for, prepared by,

Mr.md monjur alam SM SAIFULLA MANSUR
Assistant professor,dba id no. : r181273
International Islamic university chittagong semester : 5th
Section : Viii
RMBA

Date of submission: 04 APRIL 2019

Disney:-

The Walt Disney Company was founded on October 16th 1923 by brothers Walt and Roy Disney. It is one
of the largest media and entertainment corporations in the world. It is the owner of 11 theme parks and
several television networks, including the American Broadcasting Company (ABC). Disney started making
films in the 1930’s.Some of their first films were Snow White, Bambi and Pinocchio. A lot of their earlier
films were animated adaptations of children’s fairytales

Pixar:- . Animation Studios was started by John Lasseter & George Lucas Pixar was initially a
computer graphics division owned by film maker George Lucas known as Lucas film limited. In
1986, Steve Jobs purchased the computer graphics division of Lucas Film Ltd. for $10 million and
established it as an independent company named Pixar, co-founded with Dr. Edwin E. Catmull.
On November 22, 1995, Pixar Animation Studios forever impacted the future of filmmaking with
the release of its first feature film, Toy Story. The film went on to become the highest grossing
film of 1995 with $362 million

Prior to the merger in 1997, after the release of Toy Story, a 10-year, 5-picture deal was signed,
evenly splitting production costs and profits on subsequent movies. Disney alone retained rights
to the films and characters. In addition, Disney collected 10 to 15 percent of each film’s revenue
as a distribution fee. But Pixar and Disney had ongoing disagreements since the production of Toy
Story 2. Originally intended as a straight-tovideo release (and thus not part of Pixar’s five picture
deal), the film was upgraded to a theatrical release during production. Pixar demanded that the
film then be counted toward the five picture agreement, but Disney refused. There were talks of
Pixar searching for new distributors. But with Mr. Iger taking the position of Disney’s CEO the
conflicts between Pixar and Disney were resolved and on January 24, 2006, Disney announced
that it had agreed to buy Pixar for approximately $7.4 billion. Disney offered 2.3 shares of its stock
for each Pixar share. That’s a 3.8% premium on Pixar’s closing price of $57.57
CEO: Robert Allen Iger

Born: February 10, 1951 (age 68)

Salary: US$ 65.6 million

Qualifications: Mr. Robert A. Iger, also known as Bob, has been the Chairman of The Walt Disney Company
since March 13, 2012 and has been its Chief Executive Officer since October 2, 2005. Mr. Iger served as
the President of The Walt Disney Company since October 2005 and also served as its President and Chief
Operating Officer from January 2000 to September 2005. He officially joined the Disney senior
management team in 1996 as Chairman of the Disney-owned ABC Group and was given the additional
responsibility of President of Walt Disney International. He served as the President of Walt Disney
International and Chairman of the ABC Group from 1999 to 2000. From 1974 to 1998, Mr. Iger held a
number of increasingly responsible positions at ABC, Inc. and its predecessor Capital Cities/ ABC, Inc.,
culminating in service as the President and Chief Operating Officer of ABC, Inc. from 1994 to 1999. He also
worked at ABC Holding Company, Inc. He began his career at ABC in 1974 as a Studio Supervisor in New
York, then moved to ABC Sports, where he advanced over a 12-year period through a series of increasingly
responsible management posts. He has held a series of increasingly responsible senior management
positions at ABC, where he guided the complex merger of ABC at The Walt Disney Company. Mr. Iger
served as Vice President of Programming and was responsible for all scheduling and program acquisitions
at ABC Sports since 1987. He served as the President of ABC Entertainment in Los Angeles. He served as
the President of the ABC Television Network Group in New York since 1993. During his years at ABC, he
oversaw its broadcast television network and station, cable television, radio and publishing businesses,
which includes the market leading brands of ABC, ESPN, Lifetime, A&E and The History Channel. He served
as the Chief Executive Officer of Market Watch, Inc. since 2006. He serves as a Director of Bloomberg
Philanthropies. He was employed at ESPN Holding Company, Inc. He served as the Chairman of the Disney-
owned ABC Group since 1996. Mr. Iger has been a Director of The Walt Disney Company since 2000. He
has been an Independent Director of Apple Inc. since November 2011. He has been a Board Member of
the U.S.-China Business Council since June 2011. He serves as a Director of Hulu Japan LLC. He serves as a
Director of National September 11 Memorial & Museum at the World Trade Center Foundation, Inc.,
Lincoln Center for the Performing Arts, Inc. and New York City Outward Bound. He serves as a Trustee of
American Film Institute. He serves as a Trustee of the Museum of Television and Radio of Ithaca College.
He served as a Director of ABC, Inc. since 1994 and Infoseek Corporation since November 1998. Mr. Iger
is a Member of the Partnership for a New American Economy, a coalition of mayors and business leaders
from across the United States that support comprehensive immigration reform. In June 2010, he was
appointed as U.S. President's Export Council, which advises the U.S. president on how to promote U.S.
exports, jobs and growth. In 2012, Mr. Iger became a member of the Academy of Arts & Sciences, one of
the nation’s most prestigious honorary societies, which recognizes some of the world’s most
accomplished scholars, scientists, writers, artists and civic, corporate and philanthropic leaders. He serves
on the Executive Advisory Board of the Elizabeth Glaser Pediatric AIDS Foundation. He has been named
one of Fortune magazine's “25 Most Powerful People in Business” (2006, 2007); one of the “Top Gun CEOs”
by Forbes magazine (2009); one of the “Best CEOs” by Institutional Investor magazine (2008, 2009, 2010,
2011); Market Watch CEO of the Year (2006); and “CEO of the Year” by Chief Executive Magazine (2014).
Mr. Iger received a BS in Communications from Ithaca College.

Disney’s Products:

Before Merger:
 Cable television
 Publishing films
 Music
 Video games
 Amusement parks
 Broadcasting
 Radio
 Web portals

Pixar’s Products:
Before Merger:
 Pixar Image Computer
 Pixar Renderman
 Presto Animation System
 Animated films

Disney’s & Pixar’s Products:

After Merger:
Disney-Pixar merger is a vertical merger. They merged only for their animated film products.

On January 24, 2006, Disney announced that it had agreed to buy Pixar for approximately $7.4 billion.
Disney offered 2.3 shares of its stock for each Pixar share. That’s a 3.8% premium on Pixar’s closing price
of $57.57.

Overall it was a successful integration. This can be seen from their following merged products and earned
revenues:

Title Revenue Year

Cars 2 $552 M 2011
Toy story 3 $1063 M 2010
UP $731 M 2009
Wall E $521 M 2008
Success Factors:
On May 5, 2006 the two esteemed companies Disney and Pixar merged. Disney acquired shares worth
$7.4 billion in Pixar and made it Disney's subsidiary. Since then it has been reported as one of the most
successful mergers of times.

The key reasons for the success of the merger of the two companies was that:

Investors saw potential for Disney to leverage on Pixar’s computer animated character to be used in its
vast network. One successful example was “Cars”. The revenue in retail products from “Cars” was over $5
million.

Pixar’s willingness to change so as to be a part of the international conglomerate helped .The Disney –
Pixar merger had a successful element of time which eventually benefitted both the firms.

The merger of both the organizations helped both firms to evade augmented power of the market and
future competition from rival firms.

Finally, Disney – Pixar merger is that of transformational leadership, creating organizational learning and
devising learning teams, creating a culture of learning in the organization and creating a sense of shared
strategic mission and vision.

The companies not only followed normal tactics for successful merger but also came with some different
ones.

 Pixar created a list of things that would not be changed so as to preserve its culture like Pixar
employees didn’t sign employee contracts
 BobIger ensured that Pixar employees get mixed in the new environment

Post-merger Performance:
The merger allows Disney and Pixar to exploit both financial and organizational synergies.

Financial Perspective:

 The merger increased Disney’s stock price.

 It eliminates the trouble of coming to agreements regarding production and distribution fees.

 Financial performances improve, driven by the high growth rate of Pixar (39%), new improved films,
and other streams of revenues such as merchandising.

Organizational Perspective:
 The acquisition allows Disney and Pixar to concentrate on individual strengths, which turn into
increased productivity and generate more sales.

 Disney has good stories, knowledge of the merchandising industry, and strong distribution channels
while Pixar has the technology and creativity. Both parties can market its production together and get
more profit.

 They can also exchange the valuable and talented human resources, which enables them to develop
improved content and continue producing top hit motion pictures.