CORPORATE ACCOUNTS

CIA- III
Merger of companies
Disney and Pixar

Submitted on: 8th April 2021

Team members
1. Ananya chandwani 2023648
2. K.S. Sri Sangmeshwaran 2023616
3. Prateek dang 2023632
4. Devansh Agrawal 2023604
Overview:
Beginning their relationship, Disney and Pixar made an
agreement that stated they would produce and distribute
one computer generated animated movie together. That
movie was known as Toy Story, the world’s first
computer animated feature film. ▪ Because of the
popularity and success of Toy Story, which was
released in November of 1995, Disney and Pixar
developed another contract in 1997 that agreed to
jointly produce a total of five movies over the next ten
years. ▪ Nearing the end of the Disney and Pixar
collaboration deal in January of 2006, the Walt Disney
Company announced they would be acquiring Pixar
Animation Studios for $7.4 billion in an all-stock
transaction.

Disney and Pixar merger motive:

Both these companies are a perfect fit since they complement

each other in various ways. Some proclaim that Jobs and
Lasseter in the field will bring henceforth be equivalent to
bringing back Walt Disney.
 Synergies seen in combining successful animation
expect from Pixar and studio experts from Disney.
 The weakness of Pixar to get the required capital.
Therefore, this merger would allow the firm to unite
with Disney in order to ease business costs.
  Establishing distribution channel to family centered
audiences through cross-related retail outlets, including
theme parks, and stores.
 Hybrid character development
 Making multiple box office feature film through
proprietary 3D and CG animation technology.
 Faster and lower costs.

Type of merger:

Situation pre-merger:
By 2005, Pixar had already become a significant Disney
partner. Disney needed a push to make motion pictures
more profitable. Disney’s profitability came from Pixar.
This was from 1998-2004. Pixar had significant revenue
in Disney. Around 60% of the Disney’s operating
income.

Purchase consideration paid:

Disney purchased Pixar in 2006 at a valuation of $7.4
billion by converting each share of Pixar stock to 2.3
shares of Disney stock.  Following
Pixar shareholder approval, the acquisition was
completed May 5, 2006. The transaction catapulted
Jobs, who owned 49.65% of total share interest in Pixar,
to Disney's largest individual shareholder with 7%,
valued at $3.9 billion, and a new seat on its board of
directors.[5][49] Jobs's new Disney holdings exceeded
holdings belonging to ex-CEO Michael Eisner, the
previous top shareholder, who still held 1.7%; and
Disney Director Emeritus Roy E. Disney, who held
almost 1% of the corporation's shares. Pixar
shareholders received 2.3 shares of Disney common
stock for each share of Pixar common stock redeemed

Key reasons for success

The key reasons for the success of the merger of the two companies was that investors
saw potential for disney to leverage on pixar’s computer animated character to be used
in its vast networks. One successful example was “cars”. The revenue in retail products
from “cars” was over $5 million. Pixar’s willingness to change so as to be a part of the
international conglomerate helped. Pixar not only developed new movies but also
sequels of original ones. Executives also chained their minds of alternative production
channels: direct to dvd was accepted as a part of disney-pixar portfolio. The experience
of bob iger in the field of merger helped the two companies greatly. The companies not
only followed normal tactics for successful mergers but also came with some different
ones. Pixar created a list of things that would not be changed so as to preserve its
culture like pixar employees didn’t sign employment contracts as it believed “we’ve
never had to go back and look at it. Everything they’ve said they would do they have
lived up to”. Bob iger ensured that pixar employees get mixed in the new environment.
He gave pixar employees new responsibilities and tasks to increase the efficiency of
disney. Finally the transformational leadership at pixar was brought to disney. Their
ability to lead and motivate employees in a way that they easily adapt to the dynamic
environment was legend and disney adopted it .