What is a hostile takeopver and how does it work? Is there anyway to stop it?

A hostile takeover is when one company attempts to acquire another company against the wishes of the management, shareholders, and board of directors of the target company.

In this case, Comcast has made an unsolicited offer (basically meaning that the Disney Board did not agree to it) to buy all outstanding shares of the Disney company.

What they are offering in this case are shares of Comcast, in return. They are also offering to assume all of Disney's outstanding debt.

If shareholders accept the offer, then the transaction happens, and Disney belongs to Comcast. All Comcast really needs is a majority of the shares. At that point, the minority really has no choice - they no longer have control.

There are a number of ways to fight a hostile takeover. Once is what is known as a Poison Pill. Disney has a Poison Pill in the corporate bylaws - basically, it will allow the board to do something that will make the deal so unappealing to Comcast that they go away. For Comcast to make this move, they must feel that they have a way to negate the effects of the pill.

Secondly, Disney can try to convince its shareholders to reject the offer. If Comcast doesn't get enough takers on their offer, they lose.

Who would say yes to this? I'm confused too. :confused: I'm only in my first month of my first economics class. :p

How can they take it over if the company doesnt want them to?

It sounds like Comcast is invading Disney and going to war. :geek:

Originally posted by Disneys Biggest Fan
How can they take it over if the company doesnt want them to?

Basically Comcast is making an offer to purchase shares from the current owners. (Disney is owned by MANY different folks, anybody who owns shares is a partial owner).

If the owners prefer the Comcast offer, to what Disney is currently trading at (and the potential for the future)... they can sell and/or trade with Comcast...

If Comcast collects over 50% of the shares, they become the Majority owner of the company, and basically has complete control, since they can win any vote taken....

Comcast cannot force anyone to sell BEFORE they get the 50%, so they do to make a good offer for the shares, and a good explanation of why it would be better to have Comcast run the company instead of Eisner and his group. Once they get the 50+% percent, they can hold a vote, and then force the rest of the shareholders to convert to Comcast shock.

Thanks for clearing that all up Tony.

Originally posted by SouthflLady
Who would say yes to this? I'm confused too. :confused: I'm only in my first month of my first economics class. :p

First of all, realize that Disney is actually owned by all the people that own Disney stock. And most of those people own it for reasons that have nothing to do with Disney magic, their love of Walt Disney World, or a childhood fondness for Mickey Mouse.

They own it for money. They have invested a certain amount because they expect to get more later.

Essentially, Comcast will offer a financial incentive to shareholders to approve it.

Let's say that a share of Disney stock is worth $10. Comcast is offering to buy every share of Disney stock. If they just offered $10 (in Comcast stock), the basis on which people would decide to support is whether over the long term they think their investment will be worth more as Disney stock or as Comcast stock (and if they think Comcast, why did they have their money in Disney).

So instead, they will offer to buy your $10 share of Disney with $13 of Comcast stock. So then the question is, over the long term, which is worth more to the investor: $10 in Disney or $13 in Comcast.

Sweeten the pot enough and it becomes financial idiocy to prefer the $10 of Disney over the $XX of Comcast -- unless you think the two companies uniting would be completely ruinous to both.

Keeping in mind that the majority of Disney stock is owned by institutional investors, a group who's interests are purely financial without a smidgen of nostalgia and it is entirely possible that Comcast could buy Disney without Disney wanting to sell.

It only has to convince the larger shareholders. I've copied the list from Yahoo! around here.
Once it does that, it puts up a slate of board nominees, who, once voted in, propose Comcast-friendly policies to force the conversion of DIS shares to Comcast shares. It will take a while, and there are a lot of obstacles, notably the hockey teams. Nothing that money can't fix.

Big savings to NewCo:
1. No more negotiations about networks on its cable outlets.
2. All profits of Disney PPV movies goes to one company, instead of two.
3. Can raise local cable advertising rates, which will now compete with in-house vacation destinations. Disney can create half-hour advertising programming for Comcast instead of showing those great exercise machines or diet plans.
4. Special offers to Comcast subscribers for vacation destinations.
5. Downloadable (but uncopyable) DVDs for rent (some kind of self-destructing thing) or to buy through Comcast cable internet.

Wow, thanks guys! I get it all now. :D I wish I was going to be tested on this. :p
It sounds really crazy though.. that this could happen!

Originally posted by Disneys Biggest Fan
How can they take it over if the company doesnt want them to?

It all has to do with the fact that once a company issues stock (shares) it no longer "belongs" to itself; it now belongs to everyone holding stock, even if they hold only one single share. Anyone who owns shares, be they individuals, institutions or whom/what-ever else, can vote on propositions such as this one. Comcast is offering to give .78 of a share in its stock for every 1 share of Disney. If Disney's stockholders vote to approve this, then the company is sold. The danger is that a large percentage of Disney's shares are held by institutional investors (large companies that buy thousands of shares at a time) who are interested primarily in returns, not tradition or emotion. They’re merely business units who see the Disney company as spreadsheet data, nothing more. To counter this most companies keep a majority of their stock (like 51%, for example) in their control, with those share’s votes cast by the board or CEO (not exactly sure which in this case.) I don't think Disney has done this (though I could be wrong) and therein lies the danger of being sold against its will. This is a very simplified explanation of a complicated system, but that’s basically it in a nutshell.

I sincerely hope that this doesn't happen. Once Disney has lost its autonomy, I really think it'll be all over.

Disregard my last post. Five other people beat me to the "submit" button and explained it better than I did. :D

Originally posted by The Jazzman
The danger is that a large percentage of Disney's shares are held by institutional investors (large companies that buy thousands of shares at a time) who are interested primarily in returns, not tradition or emotion. They’re merely business units who see the Disney company as spreadsheet data, nothing more....

I sincerely hope that this doesn't happen. Once Disney has lost its autonomy, I really think it'll be all over.

One thing to keep in mind, though, is that these same institutional investors also want to do what's best for the company (though true it's more financial than creative). Even with an attractive takeover bid, it may not be a good move for both the acquired and acquiring company. Just because you may be getting a more attractive offer financially doesn't mean you'll take it. Let's say for sake of argument that someone comes up with a really good reason why Comcast would run the Disney "division" into the ground...then the Disney shareholders would not want to sell even though they may be offered $26 or $36 for their $23 Disney stock. Institutional investors aren't looking to sell their stock when and if Disney is acquired. They still want value for their holdings...at some point, just dollars isn't enough to approve a takeover.

There can be much more to this analysis, but I think I've made my point. We shouldn't worry too much based on what we've heard so far...there's way more that needs to be considered.

Oh definitely. I think Comcast would have to sweeten the deal quite a bit more before it'll take. 6% isn't that much and if the board and Eisner strongly oppose there's quite a bit they can do to reduce the attractiveness of that six percent.

Especially since the premium offered this morning is currently already under water.

This morning Comcast was offering .78 shares for each Disney share.

That meant that $26.49 was being offered for a share of Disney worth only $24.08.

With the changes in stock prices today, Comcast lost 9% is now offering a .78 share worth only $24.10 when a share of Disney shot up 14% and now costs $27.44.

Of course, the numbers will all change tomorrow

Originally posted by Dlandmom
Even with an attractive takeover bid, it may not be a good move for both the acquired and acquiring company. Just because you may be getting a more attractive offer financially doesn't mean you'll take it. Let's say for sake of argument that someone comes up with a really good reason why Comcast would run the Disney "division" into the ground...then the Disney shareholders would not want to sell even though they may be offered $26 or $36 for their $23 Disney stock...

Absolutely, I agree, but I'm not an institution. I'm an individual. But if Institution/Company X holds Y number of Disney shares and stands to make Z amount of profit by taking the deal and then dumping their shares after the merger if things do go south then they will probably do it. It may end up badly for both companies, as the whole AOL-Time Warner deal did (which is why they dumped AOL from the name and returned to simply Time Warner) but by then the institutional investor will probably have cut and run. Remember, we're not talking about how either company feels about the merger, but how the major shareholders feel and what they think they can get out of it on paper. Big time shareholders may see this as a chance to make what they can before Disney stock alone gets any worse. I honestly hope that the AOL-Time example will be a warning flag to shareholders and votes will be placed in opposition of the deal, but the market is inherently unpredictable, so who knows. I'm crossing my fingers that this will all die but at the same time preparing myself to say adios to the company as we know it.

Originally posted by The Jazzman
Absolutely, I agree, but I'm not an institution. I'm an individual. But if Institution/Company X holds Y number of Disney shares and stands to make Z amount of profit by taking the deal and then dumping their shares after the merger if things do go south then they will probably do it.

Shouldn't be too much of a worry. Keep in mind that most institutional shareholders do NOT want to dump their stock unless it's absolutely unavoidable. It's a little thing called capital gains tax....

Yes, dumping your shares is an out, but most institutional shareholders want to avoid that. They're going to make sure that it's a viable result before they vote for a merger. Take a look at what ISS announced today...they're telling institutionals and individuals to vote Eisner and his cronies out. Such an announcement could wreak havoc on the share price, but it's something that's important enough in the long run to preserve the stock's (and the company's) value.

I agree. And their reasoning must be that Eisner and his cronies are dampening stock growth.
This takeover attempt actually confirms this, as successfully managed companies are less apt to be hostily taken over, because their stock price is at a premium. Poorly managed companies can be bought cheaper, their management replaced with more efficient management.

And all this talk about Fox Family Channel: $5 BILLION??? Think of what DCA could have been and could have returned to the company with that money.

Why doesnt disney buy the stock before comcast? And wouldnt it be impossible to own 50% of a company that big even for comcast?

Originally posted by Disneys Biggest Fan
Why doesn't Disney buy the stock before Comcast? And wouldn't it be impossible to own 50% of a company that big even for Comcast?

Comcast has a LOT of money right now (they sold off QVC, partially to participate in the Universal bidding), while Disney has quite a bit of debt.

Disney could offer to buy back stock, or a much more likely scenario is finding another partner, which Disney prefers, and then try and persuade shareholders to sell to the third party, and not Comcast...

That would cause a bidding war, which would make the shareholders happy... but would cause additional debt to the new company....

Lets say Comcast buys 40% of the stock and hits a wall. Doesn't that mean Comcast is risking their own financial sercurity if the takeover fails?

Any examples of big name takeovers someone can share with me?

I am learning all about this is my Marketing classes. Last night my teacher went over the different quadrants of businesses. And now I get extra credit for applying it to real life!

Disneys stocks are going up sharply while Comcasts are falling sharply.

Disney is in the defense position. This means that Disney is the bigger company.

Comcast is the offensive, and is attacking Disney. They aren't the largest company but feel they can win.

Now Comcast needs to attack Disney at it's weaknesses. Yet, they are attacking Disneys strengths (as a whole). Comcasts better move would have been to try and buy off the TV networks from Disney, and not the whole company. Eisner would be smart to let the TV stations go to Comcast, especially with the pressure for him to be ousted.

How accurate is this?

Comcast is in fact the larger company, not Disney.

Originally posted by Disneys Biggest Fan
Why doesnt disney buy the stock before comcast? And wouldnt it be impossible to own 50% of a company that big even for comcast?

1) Comcast is not attempting to buy significant amounts of Disney stock on the open market. They are trying to convince Disney shareholders to sell it, en masse, at a set price.

2) Disney buying back stock wouldn't allow it to directly resist a takeover. When a company buys back its own stock, those shares become "treasury shares" rather than "outstanding shares." Treasury shares don't get to vote and to approve a deal would only require 51% of the outstanding share. Indirectly, this could help for several reasons but not because it would give Disney more votes.

Sorry, I want to correct my statement that Comcast is the bigger company... it is not.

Comcast has more assets and money, but less revenue which makes them a smaller company.

Comcast does make more profit on less revenue.