DISNEY & PIXAR

MERGER

JUTHIKA ACHARJEE,
MBA 2ND SEMESTER,
SCHOLAR ID- 18-50-109
 Company Profile : Disney
 Founded on October 16, 1923 by
brothers Walt and Roy O. Disney, the Walt
Disney company, commonly known as Walt
Disney or simply Disney, is an American
diversified, multinational, mass-media and
entertainment conglomerate.

 Headquartered at the Walt Disney studios

in Burbank, California, it is the world's
largest independent media conglomerate in
terms of revenue, ahead of NBC Universal
and Warner Media.
 The Company’s corporate Mission
Statement is--
“Using our portfolio of brands to The Company’s corporate Vision is—
differentiate our content, services and “To be one of the world’s
consumer products, we seek to develop the leading producers and providers of
most creative, innovative and profitable entertainment and information.”
entertainment experiences and related
products in the world.”
Industry Mass media Entertainment
Headquarters 500 South Buena Vista Street, Burbank, California, United States
Key people Robert A. Iger (Chairman and CEO)
Christine McCarthy (CFO)
Products Cable television, publishing, films, music, video games, amusement
parks, broadcasting, radio, web portals
Revenue US$59.434 billion (2018)
Operating income US$ 15.706 billion (2018)
Net income US$ 12.598 billion (2018)
Total assets US$ 98.598 billion (2018)
Total equity US$ 52.832 billion (2018)
Number of employees 201,000 (September 30, 2018)
Divisions • Walt Disney Studios
• Disney Media Networks
• Parks, Experiences and Products
• Direct-to-Consumer and International
Subsidiaries Marvel Entertainment
Website thewaltdisneycompany.com
 Company Profile: Pixar
• Pixar Animation Studios is an
American computer animation film
studio based in Emeryville, California.
• 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.
 Pixar Animation Studios Mission & Vision
Mission Statement:
Pixar's objective is to combine proprietary technology and world-class
creative talent to develop computer-animated feature films with memorable
characters and heart-warming stories that appeal to audiences of all ages.

Vision Statement:
At Pixar, our goal is to make great films with great people.
Trading name Pixar

Type Subsidiary

Industry Computer animation, motion pictures

Predecessor The Graphics Group of Lucas film Computer Division

Founded February 3, 1986; 33 years ago in Richmond, California, U.S.

Edwin Catmull
Founder
Alvy Ray Smith
Headquarters 1200 Park Avenue, Emeryville, California, U.S.

Area served Worldwide

•Jim Morris (President)
Key people
•Pete Docter (CCO)
•Pixar Image Computer
•Pixar Renderman
Products
•Presto Animation System
•Animated films
Parent The Walt Disney Studios

Website pixar.com
 THE MERGER

Steve Jobs (left) Co-founder of Pixar and

Robert A. Iger (right) Chairman and CEO of Disney
 Supplier
Power -
Moderate

Buyer Barriers of
Power - Entry -
Moderate High
Movie
Industry

Threat of
Rivalry - Substitute
High Products -
Moderate

Porter’s Five Forces Analysis

of the Animated Movies
Industry
 REQUIREMENT OF MERGER/ACQUISITION :
• Iger had realized Disney needed to buy Pixar while watching a parade at the
opening of Hong Kong Disneyland in September 2005.
• Iger noticed that of all the Disney characters in the parade, not one was a
character that Disney had created within the last ten years while all the newer
ones had been created by Pixar.
• Iger commissioned a financial analysis that confirmed that Disney had actually
lost money on animation for the past decade.
• When presented with this information, the BODs authorized him to explore the
possibility of a deal with Pixar.
• While Disney just started developing its own computer animation films, Pixar
already generated billions of dollars from its 6 animation motion pictures.
• The acquisition would allow Disney access to Pixar’s proprietary technology.
• Furthermore, this would help Disney attract new customers and generate more
revenues from high quality, innovative types of films.
 2006 Box Office Market Share
Market
Distributor
Sony Share
7% Sony 19.20%
3% News Corporation (Fox)
19%
News Corporation (Fox) 17.00%
11% Disney
Disney 16.70%
Time Warner (WB) Time Warner (WB) 14.90%
11% 17%
NBC Universal NBC Universal 10.80%
Viacom (Paramount) Viacom (Paramount) 10.80%
Lionsgate 3.60%
15% Lionsgate
17% Other 7.00%
Other
 THE MERGER PROCEDURE
• On January 24, 2006, Pixar Animation Studios and The Walt Disney
Company entered into a merger agreement. The deal was consummated on May
5, 2006 for a purchase price of $7.4 billion.
• Pursuant to the terms of the merger agreement---- Lux Acquisition Corp., a
wholly-owned subsidiary of Disney, woull merge with and into Pixar, and
Pixar will survive and continue as a wholly-owned subsidiary of Disney.
• The acquisition catapulted Jobs, who owned 49.65% of total share interest in
Pixar, to Disney's largest individual shareholder with 7% shares, valued at $3.9
billion, and a new seat on its Board Of Directors.
•To purchase Pixar, Disney exchanged 2.3 shares of its common stock for
each share of Pixar common stock, resulting in the issuance of 279
million shares of Disney.
• The acquisition purchase price was $7.4 billion in an all-stock deal.($6.4
billion of stock and Pixar’s cash & investments of approx. $1.0 billion).
The value of the stock issued was calculated based on the market value of
the company’s common stock using the average stock price for the five
day period beginning two days before the acquisition announcement date
on Jan 24th, 2006.
 SYNERGIES
• The merger allowed Disney and Pixar to exploit both financial and
organizational synergies.
•From the financial perspective, the merger increased Disney’s stock price. It
eliminated the trouble of coming to agreements regarding production and
distribution fees. Financial performances improved, driven by the high growth
rate of Pixar (39%), new, innovative and improved films, and other streams of
revenues such as merchandising.
•In terms of the revenue, stockholders got the higher share price from merging
between two parties. Shares of Pixar gained nearly 3% from after-hours trading
and Disney’s stock gained about 1.8% in regular trading.
•From an organizational point of view, the acquisition allowed Disney and Pixar
to concentrate on individual strengths, which resulted in increased productivity
and generated more sales. Disney had good stories, knowledge of the
merchandising industry, and strong distribution channels while Pixar had the
technology and creativity. Both parties marketed their productions together and
gained more profit.
•They also exchanged the valuable and talented human resources, which enabled
them to develop improved content and continue producing top hit motion pictures.
 REASONS FOR SUCCESS OF THE MERGER/ACQUISITION:
• Iger was more considerate. Where most mergers are dictated by the dominant force,
Iger was more willing to accept the culture of Pixar as part of its strength.
• Disney made a whole ream of promises to Pixar. A year after the merger was sealed,
Pixar executives reviewed that list, and found every single promise had been kept.
With trust confirmed, Pixar became more open to doing certain things the Disney
way.
• Pixar and its employees were able to maintain their own identity within the enlarged
group and Disney allowed Pixar’s corporate culture to remain intact.
• Utilising merged strengths Senior Pixar talent were asked by Iger to examine and
improve underperforming Disney divisions. He had bought a people business and
was determined to use it to its best advantage.
• Each company highlighted their own values. They approached the
merger constructively, with Disney employing Pixar talent as it should be. This
helped to make sure that the best people stayed, as did Disney’s acceptance of Pixar
employment conditions.
• Both sets of executives and change leaders communicated effectively, helping
to onboard key influencers.
Robert Iger (left), CEO, Walt Disney (2005- present) and John Lassester
(right), CCO of Pixar & Disney (2006-2018)
 CONCLUSION
• Overall it was a very successful integration, which was intensely discussed in
the press as well as the management literature and research.
• The financial results clearly prove this success. Since the merger, Disney-Pixar
generated $4.1 billion in Box office revenues in only 5 years. Compared to $3.2
billion in the previous 9 years.
• There were two major issues that the public and Wall Street feared after the
acquisition of Pixar through Disney. One was that Disney – with its sheer size -
would trample Pixar’s creative power and turn the Pixar executives into mere
Disney-puppets. The other scenario depicted a spoiled team of Pixar executives
and animators, completely unwilling to make this partnership a success and not
respecting the requests of its new owners.
But luckily, both apprehensions didn’t materialize. On the contrary, the
merger is noteworthy for the success it had and how apparently easy the
integration was so far. Despite many mergers that destroyed more value than
they were anticipated to create (especially in the media sector), Disney and
Pixar made it work.
The merger/acquisition is known to be one of the most successful and
smartest of all times.
 References
• Chinta, Naga. (2018). Disney , Pixar Merger Strategic and Competitive
Analysis: Naga Rakesh Chinta, Harvard Strategic Management.

• Barthélemy, J. (2011). The Disney–Pixar relationship dynamics: Lessons for

outsourcing vs. vertical integration. Organizational Dynamics, 40(1), 43-48.

• Buckley, A. M. (2011). PIXAR: The company and its founders. ABDO

Publishing Company.

• Fonda, D. (2006). Who Gains from a Pixar-Disney Merger?. www. time.

com/time/business/article/0, 8599(1150674), 00.

• Latif, M., Jaskani, J. H., Saeed, I., Shah, K., & Azhar, N. (2014). Tactful
Acquisitions& merger of The Walt Disney Company improved its
performance, showed by financial & industry analysis. International Journal
of Accounting and Financial Reporting, 4(1), 274.

• (Disney.com) http://corporate.disney.go.com/corporate/complete_history.html

• (Pixar.com) http://www.pixar.com/companyinfo/history/index.html
Thank You..