Comcast offers to buy Disney for $66 billion

Cable telecommunications company Comcast Corp. offered to buy The Walt Disney Co. for $66 billion in an all-stock transaction Wednesday. The merger terms offer Disney shareholders control of 42 percent of the combined company.

Earlier this week, Comcast had approached Disney privately with an offer to buy the company, but was rebuffed, according to a letter from Comcast CEO Brian Roberts to Disney Chairman and CEO Michael Eisner, which Comcast made public Wednesday.

In the letter, Roberts suggested Disney could benefit by developing new ways to deliver its content to Comcast’s subscriber base (of 21 million cable TV subscribers and 5 million high-speed Internet access subscribers), such as video on demand and broadband video streaming.

“We have a wonderful opportunity to create a company that combines distribution and content in a way that is far stronger and more valuable than either Disney or Comcast can be standing alone,” Roberts wrote.

Comcast would issue .78 share of its Class A common stock for each share of Disney, creating a combined company with a market capitalization of $122 billion and a hand in everything from high speed Internet access to the ABC broadcast network and the famous Disney amusement parks, Comcast said in a statement.

Comcast claims its deal represents a premium of $5 billion for Disney’s shareholders over its current market value.

Comcast is confident that the regulatory approvals necessary for a merger can be obtained in a timely fashion, it said.

The proposed deal recalls an earlier merger between a content provider and service provider: America Online Inc.’s merger with Time Warner Inc., said Chris Charron, research director at Forrester Inc.

“This is another example of a company that owns the pipes trying to use that as leverage to move into another piece of the value chain,” he said.

Comcast is looking to the merger to give it quick access to content, especially for its new Video On Demand cable service, which many media companies have been wary of licensing content to, because of the threat it poses to traditional content syndication arrangements, a rich source of revenue over the years, he said.

Buying Disney would give Comcast a rich source of programming for Video on Demand and establish Comcast as the premiere company in the rapidly converging markets for delivering broadband Internet and video entertainment to households. That will help it fend off competition from other telecommunications and satellite companies that are vying for consumers, Charron said.

However, if successful, the merger could raise troubling questions about media consolidation, he said.

“For those who oppose the current media ownership laws, this kind of merger is as concerning as a combination of media companies. You have the largest cable company and one of the largest media companies merging,” he said.

Comcast scheduled a press conference in New York City Wednesday to discuss its plans.