Disney Case Analysis

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Hostile Takeover Attempt by Saul Steinberg

Walt Disney Productions should repurchase Saul Steinberg’s shares. The management for Walt Disney has lost their focus over the course of the last few years, prior to June, 1984. After the death of Walt Disney in 1966, the company has found it hard to replace his leadership and the ability to make sound decisions.
Business Strategy
In the past, Walt Disney Productions’ business strategy has been focused on their theme parks and motion pictures. This strategy propelled Disney to become the most well-known company in the world and it was very profitable. Recently, Disney’s strategy has been real estate development and trying to gain a foothold in the cable programming services. They have …show more content…

Walt Disney Productions is not an “excellent” company. It looks good on the outside, but there are crucial problems in management that must be resolved.
Repurchase Saul Steinberg’s shares
I stated at the beginning that Disney should repurchase their shares from Steinberg and then refocus their attention on management. The greenmail should not be higher than the stock’s intrinsic value. I believe that Disney’s intrinsic value is $63.60 (see Exhibit 5). Steinberg acquired 6.3% of the stock on April 9, 1984 at $67 per share and again he acquired an additional 5.8% of the stock on May 2, 1984 for $66 per share. The acquisitions of the stock by Steinberg were greater than the value of Disney. This poses a dilemma since Steinberg will not go away for less than his purchases. I think that Disney does not have much choice in this situation. If Steinberg takes over Disney, then he will probably sell Disney’s assets and walk away unscathed. Many jobs will be lost and Disney will either change forever or not exist anymore. Most raiders expect a return between 25%-50%. With a 50% return the greenmail price is $72.70 and with a 25% return the greenmail price is $69.88 (see Exhibit 6). The stock price will decline after a greenmail payment and only investors that are with Disney for the long-run will stay. This does represent a transfer of wealth from the shareholders to Steinberg

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