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Comcast Withdraws Bid for Disney - 2004-04-28

Leading cable television operator Comcast Corporation said Wednesday that it is withdrawing its $48.4 billion bid to buy the Walt Disney Company, which owns entertainment assets including the ABC and ESPN television networks, film studios and theme parks.

In dropping its bid, Comcast cited a lack of interest by Disney for the deal and other considerations. Ending the bid allows Comcast to revive a plan to buy back $1 billion worth of its shares, which had declined 12 percent since it made the offer for Disney in February. Comcast's original bid, rejected as too low by the Disney board, involved a swap of less than one share of Comcast [0.78 share] to Disney shareholders for each share they owned of Disney. Comcast chief executive Brian Roberts says that changes in the respective share prices of the companies in the months since the offer was made changed the deal:

"Consummating a transaction would have required us to give up substantially more Comcast shares than we originally proposed," he said. "And quite simply, this does not make good financial sense, particularly given this quarter's performance. Being disciplined means knowing when it is time to walk away. That time is now."

Often, in takeover bids such as the one Comcast made for Disney, experts say that the bidding company can be expected to make an initial low bid, and then improve it over time. That did not happen in this case, but media analyst Angela Kohler says that Disney's improved fortunes made Comcast's bid less attractive.

"There were a lot of people expecting Comcast to come back with a cash offer, or for there to be some other white knight [buyer) to be stepping in," said Angela Kohler. "So the real story here is improvement in the [Disney] theme parks, the consumer being willing to travel again, and what that means for profit margin improvement in the company overall."

Analysts wonder if one reason that Comcast is no longer interested in acquiring Disney is because Comcast is looking at buying other companies, such as bankrupt U.S. cable-television operator Adelphia Communications. While Comcast CEO Brian Roberts has said Comcast will consider buying Adelphia, analyst Angela Kohler says that Comcast may still have Disney in its sights.

"Regardless of what they said today, I would not rule them out," she said. "I think they have still got their hearts set on this deal. It's just a matter of allowing both stock prices to calm down a bit, and I would not be surprised at all if later on this year we saw them come back in."

Media analyst Angela Kohler with Federated Investment Management in Pittsburgh, Pennsylvania. If nothing else, the end of Comcast's bid for Disney alleviates a distraction for Disney Chief Executive Michael Eisner, who is fending off calls for his ouster from ex-director Roy Disney and other shareholders. The board of Disney, on Tuesday reiterated that it has "complete confidence" in Mr. Eisner.