Today’s big business story is the proposed acquisition of Marvel Entertainment by Walt Disney Co. This is a huge surprise, since Marvel is a newly rising entertainment juggernaut with strong financials and nowhere near exhausting its growth potential. Walt Disney recognizes this in Marvel and is proposing to pay an appropriate premium for the company. As of last Friday Marvel’s market cap was $3 billion and Disney is offering to pay $4 billion. MVL’s stock price jumped appropriately this morning.
I have been a shareholder of Marvel since I first started purchasing stock, and it has been one of my core holdings. Anybody with a functional brain could have seen this company as a buy. The Gardners at Motley Fool saw it first, and have been riding the Marvel train over the past seven years for a 14x gain! I only started this year; I picked it up on the cheap during the March low-point this year for around $27 or so and I was hoping to ride the train for much longer than just a 70% gain. Instead I will probably be selling at or around the expected $50 price to some large-money arbitrage firms. I also have the option to convert to Disney shares. While this is interesting, I don’t believe Disney has the same growth opportunities as Marvel did and I will most likely not exercise this option.
It will be interesting to observe the synergy between the divisions once Marvel is absorbed. Disney has a good track record with managing Pixar after acquiring it, playing hands-off with Pixar’s creative control and instead utilizing the finished content to profit in their other divisions (theme parks, toys, video games, books). Disney will probably look to do the same with the thousands of characters currently under Marvel’s IP. Meanwhile we can expect to see the production of new Marvel movies remain undisturbed. One sticky situation may be MVL’s current licensing agreements with Activision Blizzard. Disney will have to spend some extra cash getting ATVI to give up a potential cash cow.