Comcasts Upstart Bid for Disney Revives Painful Memories

By John Pallatto  |  Posted 2004-02-13 Print this article Print

Comcast's bid to become a diversified distribution and media company by buying Walt Disney feels uncomfortably reminiscent of the failed media and telecom mergers of the last stock market boom.

On the face of it, Comcasts unsolicited $54 billion buyout offer of the Walt Disney Co. conjures up painful memories of some of the failed turn-of-the-century mega-mergers.

Comcasts deal-making and vaulting ambition to become a media giant is uncomfortably reminiscent of the dizzying ascents of WorldCom and AOL-Time Warner. WorldCom used the Internet investment bubble and fraudulent accounting to become a bloated telecommunications behemoth until it collapsed under the crushing weight of its debt load.

AOL, seeking to wed its Internet access network with a world-class entertainment and content producer, used grossly inflated stock values to become the scrawny tail that wagged the Time Warner mastiff.

There is no indication that Comcasts growth has been built on foundations of financial quicksand. Nor can it exploit a humbled stock market that spent the last three years taking a severe cure for the irrational exuberance of the late 90s.

But we can only hope that the market regulators do a better job than they did a few years ago to ensure Comcast isnt biting off more than it can chew in its quest to buy Disney.

Comcast is offering 0.78 of a share of its Class A stock for each share of Disney stock. This would give Disney shareholders 42 percent of the merged companys stock. The deal would include Comcasts assumption of $11.9 billion of Disney debt, make the total cost of the merger $66 billion.

Using its 2001 acquisition of AT&T Broadband as a springboard, Comcast is seeking the same kind of vertical integration that drove AOLs merger with Time Warner. It wants to combine Disneys rich entertainment, television and sports assets with its cable subscriber base that totals more than 21 million and a service network that is dominant in 22 of the nations top 25 metropolitan areas.

Next page: Maintaining growth through acquisitions.

John Pallatto John Pallatto is's Managing Editor News/West Coast. He directs eWEEK's news coverage in Silicon Valley and throughout the West Coast region. He has more than 35 years of experience as a professional journalist, which began as a report with the Hartford Courant daily newspaper in Connecticut. He was also a member of the founding staff of PC Week in March 1984. Pallatto was PC Week's West Coast bureau chief, a senior editor at Ziff Davis' Internet Computing magazine and the West Coast bureau chief at Internet World magazine.

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