Disney Buys Lucasfilm and Announces New Star Wars Films (@Disney)

The Walt Disney Company has bought Lucasfilm for $4.05 billion, acquiring the full rights to theStar Warsand Indiana Jonesfranchises. Here’s the press release, which also announcesStar Wars: Episode VII for a 2015 release:

 

Global leader in high-quality family entertainment agrees to acquire world-renowned Lucasfilm Ltd, including legendary STAR WARS franchise.

Acquisition continues Disneys strategic focus on creating and monetizing the worlds best branded content, innovative technology and global growth to drive long-term shareholder value.

Lucasfilm to join companys global portfolio of world class brands including Disney, ESPN, Pixar, Marvel and ABC.

STAR WARS: EPISODE 7 feature film targeted for release in 2015.

An investor conference call will take place at approximately 4:30 p.m. EDT / 1:30 p.m. PDT today, October 30, 2012. Details for the call are listed in the release.

BURBANK, Calif. & SAN FRANCISCO(BUSINESS WIRE) Continuing its strategy of delivering exceptional creative content to audiences around the world, The Walt Disney Company (NYSE: DIS) has agreed to acquire Lucasfilm Ltd. in a stock and cash transaction. Lucasfilm is 100% owned by Lucasfilm Chairman and Founder, George Lucas.

Under the terms of the agreement and based on the closing price of Disney stock on October 26, 2012, the transaction value is $4.05 billion, with Disney paying approximately half of the consideration in cash and issuing approximately 40 million shares at closing. The final consideration will be subject to customary post-closing balance sheet adjustments.

Lucasfilm reflects the extraordinary passion, vision, and storytelling of its founder, George Lucas, said Robert A. Iger, Chairman and Chief Executive Officer of The Walt Disney Company. This transaction combines a world-class portfolio of content includingStar Wars, one of the greatest family entertainment franchises of all time, with Disneys unique and unparalleled creativity across multiple platforms, businesses, and markets to generate sustained growth and drive significant long-term value.

For the past 35 years, one of my greatest pleasures has been to seeStar Warspassed from one generation to the next, said George Lucas, Chairman and Chief Executive Officer of Lucasfilm. Its now time for me to passStar Warson to a new generation of filmmakers. Ive always believed thatStar Warscould live beyond me, and I thought it was important to set up the transition during my lifetime. Im confident that with Lucasfilm under the leadership of Kathleen Kennedy, and having a new home within the Disney organization,Star Warswill certainly live on and flourish for many generations to come. Disneys reach and experience give Lucasfilm the opportunity to blaze new trails in film, television, interactive media, theme parks, live entertainment, and consumer products.

Under the deal, Disney will acquire ownership of Lucasfilm, a leader in entertainment, innovation and technology, including its massively popular and evergreenStar Warsfranchise and its operating businesses in live action film production, consumer products, animation, visual effects, and audio post production. Disney will also acquire the substantial portfolio of cutting-edge entertainment technologies that have kept audiences enthralled for many years. Lucasfilm, headquartered in San Francisco, operates under the names Lucasfilm Ltd., LucasArts, Industrial Light & Magic, and Skywalker Sound, and the present intent is for Lucasfilm employees to remain in their current locations.

Kathleen Kennedy, current Co-Chairman of Lucasfilm, will become President of Lucasfilm, reporting to Walt Disney Studios Chairman Alan Horn. Additionally she will serve as the brand manager forStar Wars, working directly with Disneys global lines of business to build, further integrate, and maximize the value of this global franchise. Ms. Kennedy will serve as executive producer on newStar Warsfeature films, with George Lucas serving as creative consultant.Star Wars Episode 7is targeted for release in 2015, with more feature films expected to continue the Star Wars saga and grow the franchise well into the future.

The acquisition combines two highly compatible family entertainment brands, and strengthens the long-standing beneficial relationship between them that already includes successful integration ofStar Warscontent into Disney theme parks in Anaheim, Orlando, Paris and Tokyo.

Driven by a tremendously talented creative team, Lucasfilms legendaryStar Warsfranchise has flourished for more than 35 years, and offers a virtually limitless universe of characters and stories to drive continued feature film releases and franchise growth over the long term.Star Warsresonates with consumers around the world and creates extensive opportunities for Disney to deliver the content across its diverse portfolio of businesses including movies, television, consumer products, games and theme parks.Star Warsfeature films have earned a total of $4.4 billion in global box to date, and continued global demand has madeStar Warsone of the worlds top product brands, and Lucasfilm a leading product licensor in the United States in 2011. The franchise provides a sustainable source of high quality, branded content with global appeal and is well suited for new business models including digital platforms, putting the acquisition in strong alignment with Disneys strategic priorities for continued long-term growth.

The Lucasfilm acquisition follows Disneys very successful acquisitions of Pixar and Marvel, which demonstrated the companys unique ability to fully develop and expand the financial potential of high quality creative content with compelling characters and storytelling through the application of innovative technology and multiplatform distribution on a truly global basis to create maximum value. Adding Lucasfilm to Disneys portfolio of world class brands significantly enhances the companys ability to serve consumers with a broad variety of the worlds highest-quality content and to create additional long-term value for our shareholders.

The Boards of Directors of Disney and Lucasfilm have approved the transaction, which is subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act, certain non-United States merger control regulations, and other customary closing conditions. The agreement has been approved by the sole shareholder of Lucasfilm.

Note: Additional information and comments from Robert A. Iger, chairman and CEO, The Walt Disney Company, and Jay Rasulo, senior executive vice president and CFO, The Walt Disney Company, regarding Disneys acquisition of Lucasfilm, are attached.

Investor Conference Call:

An investor conference call will take place at approximately 4:30 p.m. EDT / 1:30 p.m. PDT today, October 30, 2012. To listen to the Webcast, turn your browser to http://thewaltdisneycompany.com/investors/events or dial in domestically at (888) 771-4371 or internationally at (847) 585-4405. For both dial-in numbers, the participant pass code is 33674546.

The discussion will be available via replay on the Disney Investor Relations website through November 13, 2012 at 5:00 PM EST/2:00 PM PST.

ROBERT A. IGER, CHAIRMAN AND CEO, THE WALT DISNEY COMPANY
REMARKS FOR ANALYSTS REGARDING DISNEYS ACQUISITION OF LUCASFILM LTD., AS PREPARED

As we just announced, The Walt Disney Company has agreed to acquire Lucasfilm and its world class portfolio of creative content including the legendaryStar Warsfranchise along with all of its operating businesses, including Industrial Light & Magic and Skywalker Sound.

George Lucas is a visionary, an innovator and an epic storyteller and hes built a company at the intersection of entertainment and technology to bring some of the worlds most unforgettable characters and stories to screens across the galaxy. Hes entertained, inspired, and defined filmmaking for almost four decades and were incredibly honored that he has entrusted the future of that legacy to Disney.

Disney has had a great relationship with George that goes back a long way withStar Warstheme attractions in our parks in Anaheim, Orlando, Paris and Tokyo. This acquisition builds on that foundation and combines two of the strongest family entertainment brands in the world. It makes sense, not just because of our brand compatibility and previous success together, but because Disney respects and understands better than just about anyone else the importance of iconic characters and what it takes to protect and leverage them effectively to drive growth and create value.

Lucasfilm fits perfectly with Disneys strategic priorities. It is a sustainable source of branded, high quality creative content with tremendous global appeal that will benefit all of Disneys business units and is incredibly well suited for new business models, including digital platforms. Adding the Lucasfilm IP to our existing Disney, Pixar and Marvel IP clearly enhances our ability to serve consumers, strengthening our competitive position and we are confident we can earn a return on invested capital well in excess of our cost of capital.

Star Warsin particular is a strong global brand, and one of the greatest family entertainment franchises of all time, with hundreds of millions of fans around the globe. Its universe of more than 17,000 characters inhabiting several thousand planets spanning 20,000 years offers infinite inspiration and opportunities and were already moving forward with plans to continue the epic Star Wars saga.

The lastStar Warsmovie release was 2005sRevenge of the Sith and we believe theres substantial pent up demand. In 2015, were planning to release Star Wars Episode 7 the first feature film under the Disney-Lucasfilm brand. That will be followed by Episodes 8 and 9 and our long term plan is to release a newStar Warsfeature film every two to three years. Were very happy that George Lucas will be creative consultant on our newStar Warsfilms and that Kathleen Kennedy, the current Co-Chair of Lucasfilm, will executive produce. George handpicked Kathy earlier this year to lead Lucasfilm into the future. Shell join Disney as President of Lucasfilm, reporting into Walt Disney Studios Chairman Alan Horn and integrating and building theStar Warsfranchise across our company.

Our successful acquisitions of Pixar and Marvel prove Disneys unique ability to grow brands and expand high-quality creative content to its fullest franchise potential and maximum value.

Weve leveraged Pixars terrific characters and stories into franchises across our company from feature films to consumer products online games, major attractions in our theme parks, and more.

The 2006 Pixar acquisition delivered more than great Pixar content it also delivered the means to energize and revitalize the creative engine at Walt Disney Animation which was crucial to our long term success. Animation is the heart and soul of Disney and our successful creative resurgence will be on full display this weekend when Wreck-It-Ralph opens in theaters across the country.

Our acquisition of Marvel three years later combined Marvels strong global brand and world-renowned library of characters with Disneys creative skills, unparalleled global portfolio of entertainment properties, and an integrated business structure that maximizes the value of creative content across multiple platforms and territories. Our first two Marvel films ThorandCaptain Americagrossed a total of more than $800 million at the box office. This year, MarvelsThe Avengersgrossed more than $1.5 billion to become the worlds third highest grossing movie of all time and an important and lucrative franchise for us.

Were looking forward to a robust slate of new Marvel movies starting withIron Man 3andThor: The Dark Worldnext year, followed byCaptain America: The Winter Soldierin 2014. And, as we announced previously, Joss Whedon is writing and directingAvengers 2and developing a Marvel-based series for ABC.

Pixar and Marvel both fit our criteria for strategic acquisitions they add great IP that benefits multiple Disney businesses for years to come, and continue to create value well in excess of their purchase price. The acquisition of Lucasfilm is in keeping with this proven strategy for success and we expect it to create similar opportunity for Disney to drive long-term value for our shareholders.

Were clearly excited about this move forward. We believe we can do great things with these amazing assets.we have a proven track record of maximizing the value of our strategic acquisitions. and were poised to do the same with this one.


JAY RASULO, SENIOR EXECUTIVE VICE PRESIDENT AND CFO, THE WALT DISNEY COMPANY
REMARKS FOR ANALYSTS REGARDING DISNEYS ACQUISITION OF LUCASFILM LTD., AS PREPARED

Lucasfilm, and more specifically theStar Warsfranchise, fits perfectly within the Disney portfolio of intellectual properties and the strategic and financial implications of this acquisition are compelling. Our team has spent a tremendous amount of time evaluating this deal and we have concluded we are uniquely positioned to maximize the value of Lucasfilms IP in a manner that can generate substantial value for our shareholders above and beyond the purchase price.

In this transaction we will acquire rights to the Star Wars and Indiana Jones franchises, a highly talented and expert team, Lucasfilms best-in-class post production businesses, Industrial Light and Magic and Skywalker Sound, and a suite of cutting edge entertainment technologies. Our valuation focused almost entirely on the financial potential of theStar Warsfranchise, which we expect to provide us with a stream of storytelling opportunities for years to come delivered via all relevant platforms on a global basis.

There are a number of ways our company will derive value from Lucasfilms intellectual propertysome of which can be realized immediately while others will accrue to us over time. George and his team have builtStar Warsinto one of the most successful and enduring family entertainment franchises in history, as well as one of the best selling licensed character merchandise brands in the U.S. and around the world. However, we believe there is great opportunity to further expand the consumer products business. Today,Star Warsis heavily skewed toward toys and North America. We see great opportunity domestically to extend the breadth and depth of the Star Wars franchise into other categories. We also plan to leverage Disneys global consumer products organization to grow theStar Warsconsumer products business internationally.

Let me note that in 2012 Lucasfilms consumer products business is expected to generate total licensing revenue that is comparable to the roughly $215 million in consumer products revenue Marvel generated in 2009, the year in which we announced our acquisition. With renewed film releases, and the support we can give theStar Warsproperty on our Disney-branded TV channels, we expect that business to grow substantially and profitably for many years to come.

We also expect to create significant value in the film business. We plan to release the first newStar Warsfilm in 2015, and then plan to release one film every two to three years. These films will be released and distributed as part of our target slate of 8-10 live-action films per year, and will augment Disneys already strong creative pipeline for many years to come. Lucasfilm has not released a Star Wars film sinceRevenge of the Sithin 2005. However, adjusted for inflation, as well as growth in both international box office and 3D, we estimate the three most recentStar Warsfilms would have averaged about $1.5 billion in global box office in todays dollars. This speaks to the franchises strength, global appeal and the great opportunity we have in the film business.

We also expect to utilizeStar Warsin other businesses including Parks & Resorts, in games and in our television business. These initiatives were also considered in our valuation.

Under the terms of the agreement, Disney will buy Lucasfilm for $4.05 billion, consisting of approximately fifty percent cash and fifty percent in Disney stock. Based on Fridays closing price of Disney stock, we expect to issue approximately 40 million Disney shares in this transaction. We continue to believe our shares are attractively priced at current levels and therefore, we currently intend to repurchase all of the shares issued within the next two years and thats in addition to what we planned to repurchase in the absence of the transaction.

Our valuation of Lucasfilm is roughly comparable to the value we placed on Marvel when we announced that acquisition in 2009. Our Lucasfilm valuation is almost entirely driven by theStar Warsfranchise, so any success from other franchises would provide upside to our base case. I realize it may be a challenge for you to quantify our opportunity given the limited amount of publicly available information. But to give you some perspective on the size of the Lucasfilm business in 2005, the year in which the most recentStar Warsfilm was released, Lucasfilm generated $550 million in operating income. Weve taken a conservative approach in our valuation assumptions, including continued erosion of the home entertainment market, and we expect this acquisition to create value for our shareholders.

In terms of the impact on our financials, we expect the acquisition to be dilutive to our EPS by low single digit percentage points in fiscal 2013 and 2014 and become accretive to EPS in 2015.

Our capital allocation philosophy has been consistent since Bob took over as CEO. In addition to returning capital to shareholders, we have invested, both organically and through acquisitions, in high quality, branded content that can be seamlessly leveraged across our businesses. Our acquisition of Lucasfilm is entirely consistent with this strategy, and were incredibly excited by the prospect of building on Lucasfilms successful legacy to create significant value for our shareholders.

Disney truly is an unstoppable force after the acquisition of Pixar, Marvel, and now Lucasfilm! Are you excited to see new Star Wars films?

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