The Walt Disney Company Press Release

The Walt Disney Company and The Jim Henson Company Sign Agreement for Disney to Buy the ``Muppets'' and ``Bear in the Big Blue House''

BURBANK & HOLLYWOOD, Calif.--Feb. 17, 2004--


Deal Includes Worldwide Distribution and Merchandising Rights





The Walt Disney Company (NYSE: DIS) and The Jim Henson Company today announced that they have entered into an agreement under which Disney will acquire the beloved "Muppets" and "Bear in the Big Blue House" properties from Henson.

The transaction includes all Muppet assets, including the Kermit, Miss Piggy, Fozzie Bear, Gonzo and Animal characters, the Muppet film and television library, and all associated copyrights and trademarks, as well as all the "Bear in the Big Blue House" characters, television library, copyrights and trademarks. The parties have signed a binding purchase agreement and expect the transaction to close within two months, subject to receiving the necessary regulatory clearances. The transaction does not include the "Sesame Street" characters, such as Big Bird and Elmo, which are separately owned by Sesame Workshop. The deal also includes non-exclusive production and consulting agreements under which Henson will develop potential new programming featuring the "Muppets" and "Bear in the Big Blue House" for Disney.

Brian Henson, who with his sister Lisa is co-chair and co-chief executive officer of The Jim Henson Company, said, "This new and very important relationship will enable our two companies to combine our respective talents and resources in ways that will fully realize the tremendous potential of the Muppet and Bear franchises. Michael Eisner's long-standing passion and respect for the Muppets gives me and my family even more confidence in Disney as a partner."

Lisa Henson said, "In the months before his death in 1990, my father Jim Henson pursued extensive discussions with The Walt Disney Company based on his strong belief that Disney would be a perfect home for the Muppets. As such, the deal we announced today is the realization of my father's dream, and ensures that the Muppet characters will live, flourish and continue to delight audiences everywhere, forever. My brothers and sisters -- Brian, Cheryl, John, Heather -- and I are so proud to have the Muppets living under the same roof as Walt Disney's own timeless characters. We could not possibly be more pleased."

"Since the time I worked with Jim Henson on the first Muppets TV special in the 1960s, it was obvious to me that his characters would make a deep imprint on the hearts of families worldwide, and this announcement is the culmination of a long-time desire to welcome them into The Walt Disney Company," said Michael Eisner, Disney chairman and chief executive officer.

"Kermit and Miss Piggy are well-known and beloved around the world and will have an opportunity to be seen and loved by millions more well into the future through Disney's distribution channels at home and abroad, including home video, family television programming and consumer products, in addition to the existing theme park presence at Walt Disney World and Disneyland Resort. We are honored that the Henson family has agreed to pass on to us the stewardship of these cherished assets. We are also pleased that this transaction puts us in a position to work with the Henson company on future projects," Mr. Eisner said.

Disney, which owns broadcast and cable networks reaching over 120 million households worldwide, operates or licenses theme parks on three continents, and offers home video and consumer products worldwide, is planning to re-launch the Muppets with new TV specials and series. Disney also expects to expand and enhance the global licensing and home video initiatives based on this new production for the Classic Muppets, the infant/preschool property Muppet Babies, and Bear in the Big Blue House.

The Jim Henson Company, which was purchased by the Henson family in July 2003 from the German media company EM.TV, will retain all other assets of the company including Jim Henson's Creature Shop and ownership and rights to all other characters and entertainment properties in The Jim Henson Company's extensive film and television library, including "Fraggle Rock," "Farscape," "Dark Crystal," "Labyrinth," "Storyteller," "The Hoobs," and various other properties. The Jim Henson Company will also actively pursue partnerships and other strategic arrangements to exploit these and other existing and new properties and to build their value over the long term.

FORWARD-LOOKING STATEMENTS

This press release contains various "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the proposed transaction between the The Walt Disney Company (the "Company") and The Jim Henson Company and involving risks and uncertainties related to the occurrence of future events. These forward-looking statements are based on management's current expectations, assumptions, estimates and projections about the current economic environment, the Company and its industry. Certain factors that could cause actual events not to occur as expressed in the forward-looking statement include, but are not limited to, (i) the failure to obtain the necessary antitrust or foreign regulatory clearances and (ii) satisfaction of various other closing conditions contained in the definitive asset purchase agreement. Other potential risks and uncertainties are discussed in the Company's reports and other documents filed with the Securities and Exchange Commission from time to time. The Walt Disney Company assumes no obligation to update the forward-looking information. Such forward looking statements are based upon many estimates and are inherently subject to significant economic and competitive uncertainties and contingencies, many of which are beyond the control of management of the Company. Inclusion of such forward-looking statements herein should not be regarded as a representation by the Company that the statements will prove to be correct.

I'm trying to reconcile this with the Comcast story. Doesn't this make Disney a more interesting takeover target? Sure, it raises the value of the company, and probably the stock price, but if Comcast could get Mickey & Co and Kermit & Co in one fell swoop, don't you think they would try even harder to do so?

One, don't necessarily believe that Comcast is giving up the ghost. They may just be sitting back an waiting to see if the Disney stock price goes back down.

They're saying "yes, compared to the last week our offer is cheap, but over the last three years it was generous." If the stock goes back to where it was, then that'll bolster their case that the recent rise was purely speculative and not true shareholder value. If it doesn't go back down, there is no harm in waiting a few weeks and then upping the offer.

The Muppets do add value to the company (depending on how much, and how, they're paying for them). But I don't think the Muppets would be more than a big blip on the radar of this deal (I could be wrong, but financials haven't been released) and I doubt it will have any impact in that regard.

From Comcast's point of view, I am sure it is a nice thing to have, but the Muppets aren't going to drive the deal. They want the networks, the individual things on the networks are less important.

Well, it's certainly more stuff that Comcast won't know what to do with.
It raises the value of the portion of Disney that Comcast will sell or spin off.

Comcast needs cash to make this deal. The company's stocks don't track well, so a stock trade will always end up as a no-premium arrangement.
Microsoft, one of Comcast's larger shareholders, has cash. Comcast could sell more of itself to Microsoft in order to get more money to purchase Disney, although this really is the same thing as buying Disney with Comcast stock. (Microsoft gets Comcast stock, DIS shareholders get Microsoft's money instead of Comcast stock.)

Here's a way to make many of us happy:
1. Disney cuts itself in two: networks (ABC, cable, radio) on one side, and studios, film library, vacation destinations, Henson, and Hyperion books on the other. Each shareholder gets some stock in each company. Disney Networks makes sweetheart deal with Disney Productions for cross-promoting each other -- lower movie broadcast rights, in-the-park programming, etc.
2. "Disney Networks" is sold to the highest bidder. Each shareholder gets a nice capital gain. Sweethaeart deals remain in place for ten years or so.
3. "Disney Productions" goes on as it did before CapCities purchase.
4. Eisner gone.
5. Pixar re-engages (perhaps even merges in a Miramax-style deal). Weinstein settles down. Lucas and Spielberg bring ideas for movies and upgrading theme park attractions.
6. Endor has a big tree party.

Magicians have a name for this: redirection.

It's very interesting that financials were not disclosed yet. I mean, they won't be able to keep it a secret until the Shareholder meeting. Plus, I thought the last time these two guys talked it was on shaky ground since the last deal attempt ended so poorly.

Either Henson gets to control a lot of creative stuff, or got a lot of money, and Disney Board will spin this to say that they DO care about the creative aspects and the future of the company - and that Roy and Pixar are wrong..

If people are smart (I hope they are) they'll figure out that this is the kids eating his lima beans simply because if he doesn't his toys get taken away. Otherwise he'd never eat them... (well, neither would I but that's another story ;-) ).

Don't forget. At last year's annual shareholder meeting, Eisner pretty much promised the Muppets on a silver platter. Did he really want to go in to the annual meeting without an answer to that one, after all the mess he's in already? I'm thinking that he figured it was low-hanging fruit that he could pick as a last-minute boost to his fortunes before the meeting. Do you think that it's coincidental that it's right after the Comcast deal had been shot down, and also just as the proxy ballots are finally reaching the shareholders, who now don't have much time to vote? (Ballots due by 2/27/04.)

Originally posted by Morrigoon
Magicians have a name for this: redirection.

The term for this is actually "misdirection."

--T
Graduate of Magic I, II, and III classes at the Magic Castle, Hollywood, California

It's not misdirection. It's a standard poison pill move to take on more and more debt, making any hostile takeover less attractive.

Look for Disney to go on a buying spree. Muppets is just the start. Lock up your favorite characters!

This is an absolutely brilliant political move by Eisner, and I have to admire it. In one move, he hits back against both of his attackers.

This deal defends Michael's job on both fronts by:

a) making Disney a larger (and hence more expensive) company to acquire, which defends against ComCast's bid, and

b) creates another accomplishment of Eisner regime and some positive buzz going into the shareholders meeting, helping to blunt Roy Disney's criticisms.

On the other hand, you have to wonder why the Henson family would sell these characters to Disney now. As you may remember, the Henson Co. was sold to a German media firm (EM.TV) for $340 million in cash and another $340 million in EM.TV stock in 2000. After the "dot-com" crash, EM.TV was in financial trouble and the Henson family bought the company back for $89 million. Why sell again after making anywhere between one-quarter to a half-billion dollars in profit on the last deal? My guess is that Disney made them an offer they couldn't refuse - and so I'd have to figure the deal is almost certainly for more than $100 million, perhaps even way more. In other words, Eisner may have overpaid on yet another acquisition. After all, it's not his money paying for this - it's just the shareholders'.

And while it's a great strategic / political move for Michael Eisner, whether it is a good business move for Disney depends on what they're paying for the Muppets, and how much they can ring out of that franchise in the future...

Innerspaceman is right I think. Eisner has nothing to lose here and it offers a bigger challenge for Comcast. Look for more rapid aquisitions for Disney content. Since Microsoft is a major player in
Comcast it will be interesting to see if Gates will be tempted by this latest move to throw more cash toward Disney stockholders before Eisner is able to buy up more over-valued assets. Besides the Comcasters hate to lose!

I don't think the Henson family knows how to add value to the Muppets.
I don't think anyone can.
I think they're played out, personally.
I'd like to get a DVD boxed set of the TV show of the late 70's and early 80's. Uncut. That was genius, irreverent, zaniness. TV execs don't understand that kind of unformulaic variety, so no one wants to chance it on big-time TV.
And Eisner knows that these old shows will sell big in DVD-land. Could easily sell $100 million in DVDs from them.
While he's at it, he can burn all "Muppet Babies"-related works.

And now, I'll be able to buy them at some kind of a discount. Or at least watch them on Disney Channel. Or new versions of the shows on Disney Channel. Or ABC Family. It's a lot easier to syndicate a show to your own network and have it viewable by 200 million or so cable subs, if they so desire.

Originally posted by Morrigoon
Magicians have a name for this: redirection.

Actually, that would be parents, teachers and anyone who works with children call it "redirection". Means, to quote Monty Python, when dealing with a child who's misbehaving or having a meltdown tantrum, "....and now for something completely different," and get the child to do something else so he/she will forget the previous naughty or offending or disruptive behavior.

If Disney had really wanted the Muppets they'd've purchased the Muppets a long time ago, maybe even when Jim Henson was still alive. As warm and fuzzy as I hold the Muppets in my heart, this is a poison pill purchase done perhaps in some "desperation" to fend off buyers of Disney. The timing is just so coincidental to Comcast's offer. And as warm and fuzzy as I hold the Muppets and Bear in the Big Blue House in my heart, the Muppets are "old characters". After the initial shock wore off (I was speechless!) I got to thinking about the deal and what it might mean. Muppets old TV show videos were selling for $5 each on cable TV in direct response ads not so very long ago. Kids of today know the zippy and dynamic characters of SpongeBob Squarepants and suchlike before they'd know who the Muppets are, except for the "Sesame Street" characters who, you'll notice, are not part of the sales deal with Disney (Children's TV Workshop already owns them). I'd personally would add to my wish list that the Muppets be well known and loved again back when Jim Henson was alive, don't get me wrong. But the timing of this deal is to fend off potential buyers of Disney, IMHO.

Also note:

The parties have signed a binding purchase agreement and expect the transaction to close within two months, subject to receiving the necessary regulatory clearances.

Well after the shareholder meeting. Do you think that they can keep the purchase price under wraps for three weeks? Or at least 10 days until the proxy ballots are due in?

That being said, I'm all ready for the next rehab at WDW. Coming soon, the original concept for the attraction: The Great Muppet Movie Ride!!!!

Let's say that this is an attempt to puff up the company.

Let's say Dan is correct and Disney way overpaid. They paid $200 million. (And remember, Disney's buying only a portion of The Jim Henson Company.)

That is still less than a 0.5% increase in the size of the company. If bought all on debt that only a 2% increase in debt. Unless Eisner is hoping to make a lot of these picayune (financially) purchases, I don't see it affecting the value of the Comcast offer much.

I'm sure it is an attempt to bolster his image, though. And perhaps hedge against the loss or diminishment of their use of Pooh.

On a tangent, maybe the Jim Henson people can design a better looking Stitch costume for use in the parks.


Note on numbers: According to MuppetCentral.com EM.TV bought The Jim Henson Company for $680 million. They sold Sesame Street to Sesame Workshop for $180 million. Then sold the company back to the Henson family for $84. (I know, this matches what Dan said.)

This may be a poison pill, but it is a very sugar-coated poison pill, and poison only to those bent on a hostile takeover.

There is a cautiously optimistic side of me that hopes that this is a good sign... maybe that Michael Eisner has a heart, and just maybe he won't screw the whole thing up too badly on his long way out.

That quote the other day, when he said he just couldn't go on thinking about what Walt would do, he had to go on in his own way... well, I hope he finds a balance. I hope he makes peace with those who have turned away, and pulls this back together. I'm such a dreamer...

The last two times I hear someone say they were cautiously optimistic I found myself unemployed within weeks.

And yes, I believe the word I was looking for was misdirection. Though that definition of redirection isn't half bad either.

Yeah, Disney's been wanting to buy Jim Henson for a long time-- this comes as no surprise. They have been talking for a while -- its a good fit for the parks, film division and networks. This is not a huge purchase for Disney- wasn't Fox Family outrageously expensive? Poison Pill theory is bunk- a real poison pill would be to buy an outrageously huge company like Adelphia (with all its debt) or MCI (with all its troubles) or something that doesn't really fit with Disney.

2001 Disney was going to make a play for Henson
http://www.muppetcentral.com/articles/editorials/jhcfuture.shtml

http://news.bbc.co.uk/1/hi/entertainment/showbiz/2867521.stm

http://www.laughingplace.com/News-ID115440.asp

My husband Rich and I were discussing Muppets+Disney today after an overnight of considering the news. The Muppets, bless 'em, are old and obscure to this generation of youngsters. Their old reruns of The Muppet Show are dated in cultural references, the guests and who they were and how they appeared back then and more. What child, other than the Sesame Street characters which are not part of this deal, knows who The Muppets are? They would know of Bear in the Big Blue House since that is a current Disney Channel and DL and WDW children's show and live performance. Disney would have to do with The Muppets what they are hoping to do with the Pixar characters and plots of the films they did with Pixar, which is reconstitute and repackage them and perpetuate them. That's a lot of work and a big gamble regarding the Muppets characters. Whether they can be freshened and revived for the current generation, who knows? I'd love it if they could. But would current children accept these characters outside the Muppetvision attraction at Disney-MGM Studios Theme Park in Orlando any more?

I thk I read (early this AM so who knows) that Diz paid 60 million. IF that's the case they STOLE it flat out.
The budget of a single movie is 60 million.

As to kids knowing the Muppets...they do.

DVD's...and movies like Muppet Treaure Island etc.

I have a 2 year old grandaughter who is nuts over Fozzie and kermit. (from DVD's etc. even books.) They are a valuable property and will only take one big screen Muppet hit to make them known to every one all over again!

Personally I find them FAR more appealing than anything Pixar has come up with.

What ever Diz paid...they got off REAL cheap.

While I love the Muppets, and I plan on thuroughly indoctrinating my future children to love them, buying nothing but the rights to existing characters, with no stake in any future creative product from Henson is just boneheaded. It's the same mentality that has DCA filled with cloned attractions. "If it worked once, it'll work the next 100 times!" I'm sorry, but while nostalgia is nice for a while, growth and progress are driven by innovation and creativity, not nostalgia.

Unless the two are combined, as in Main Street, USA (and heck, most of DL)

Originally posted by Ghoulish Delight
While I love the Muppets, and I plan on thuroughly indoctrinating my future children to love them, buying nothing but the rights to existing characters, with no stake in any future creative product from Henson is just boneheaded. Agreed. This is such a great deal for Henson, which now has XXX million dollars that they can use to develop new properties, which Disney is going to be forced to pay a pretty penny for the rights to down the road if they want ANY piece of that action.

From the announcement: Disney also expects to expand and enhance the global licensing and home video initiatives based on this new production for the Classic Muppets, the infant/preschool property Muppet Babies, and Bear in the Big Blue House. Kids stuff, kids stuff, kids stuff. Disney has just purchased a license they can now leverage into a children's property to replace Winnie the Pooh.

And Eisner just spent XXX million dollars of SHAREHOLDER money in an blatant effort to keep his job.

I'll bet the Henson kids "couldn't be more pleased." It's like Disney just CREATED another Pixar.

AVP

I have read conflicting news reports of the inclusion of the Muppets television and film library in this purchase. Does anyone know of a firm quote from Henson or Disney that addresses this?