The Walt Disney Company
Changing Fortunes
"One of the best examples of service through people is Walt Disney
Productions…How Disney looks upon people, internally and externally, handles
them, communicates with them, rewards them, is in my view the basic
foundation upon which its five decades of success stand."
In Search of Excellence by Peters and Waterman
''In Search of Excellence didn't simplify enough! In the private or public sector, in
big business or small, we observe that there are only two ways to create and
sustain superior performance over the long haul. First, take exceptional care of
your customers via superior service and superior quality. Second, constantly
innovate. That's it. There are no alternatives in achieving long-term superior
performance. Financial control is vital but one does not sell financial control."
A Passion for Excellence by Peters and Austin
The Walt Disney Company had enjoyed significant success over a sustained
period from 1965 to 1980. The company was seen by many as the leading
innovator in the field of customer centricity and attracted talented employees.
On the surface, Disney was the “feel good” company of the NYSE.
However, behind the scenes, Disney had become the classic take-over target. In
June 1984, the share price was $52, well below its 1983 high of $84, earnings were
down for the third straight year, debt levels were low, it had assets which could
be sold off or revalued upward for depreciation purposes, cash flow was stable
and strong and it had one of the most valuable brands in entertainment.
Take-over Dilemma
Ron Miller, chief executive officer of Disney, pondered the essence of this
dilemma. For the past two and a half months, his company had been the
subject of a takeover attempt by Saul Steinberg, a well-known raider. The
attempt had started innocently enough with the announcement of the
purchase of 6% of Disney's shares. In subsequent announcements, Steinberg's
holdings rose to 12%. When Steinberg announced his intention of acquiring a
further 37% of Disney, Miller undertook a series of evasive actions, including the
purchase of the property company, Arvida Corporation for $200 million in Disney
shares (3.33 million shares) and the attempted purchase of Gibson Greetings (a
2
company that produces greeting cards) for $310 million in Disney shares. Analysts
pondered what Disney’s intentions with these seemingly poor acquisitions were?
On June 11, 1984, Steinberg retaliated with a public tender offer in the New York
Times and Financial Times for 49% of the total shares company at $72.50 per
share. The terms of the offer were simple: he would offer the remaining
shareholders of Disney on a first come first served basis, the price of $72.50 for
their shares. This offer would commence on June 16 at 09h00 and would be valid
for the first 37% of outstanding shares presented. Steinberg was doing the
unthinkable, he was threatening to take control of Disney and realize th