Disney deal gives Marvel Entertainment the scale it needs

Walt Disney Co. (DIS) has agreed to acquire Marvel Entertainment Co. (MVL) for $4 billion, merging the corporate parent of Mickey Mouse and Hannah Montana with that of Spider-Man and the Incredible Hulk. It is the second multi-billion deal announced today. Earlier today, Baker Hughes Inc. (BHI) agreed to acquire smaller rival BJ Services Co. (BJS) for $5.5 billion.

Under the terms of the agreement and based on the closing price of Disney on August 28, 2009, Marvel shareholders would receive a total of $30 per share in cash plus approximately 0.745 Disney shares for each Marvel share they own. Shares of New York-based Marvel soared more than 25 percent in pre-market trading. They have risen 14 percent this year. Disney, which is based in Burbank, Calif., fell 84 cents, or three percent, to $26.
(Disclosure: I own Disney shares).

The deal seems to be a smart one for Disney. Economies of scale are necessary to produce the big-budget epics that are the cornerstones of a profitable movie franchise. Lacking scale, Marvel was forced to split the profits on some of its major hits, including the Spider-Man movies. For Disney, the acquisition gives it more than 5,000 Marvel characters. Marvel CEO Ike Perlmutter will oversee the Marvel properties.

“This transaction combines Marvel’s strong global brand and world-renowned library of characters including Iron Man, Spider-Man, X-Men, Captain America, Fantastic Four and Thor with Disney’s creative skills, unparalleled global portfolio of entertainment properties, and a business structure that maximizes the value of creative properties across multiple platforms and territories,” said 

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