Marvel Entertainment, Inc. (NYSE: MVL) is about to disappear. The Walt Disney Co. (NYSE: DIS) acquisition is set to close this week. Some have criticized this $4.2 billion cash and stock deal, but there is going to be more merit to this combination with Disney than just traditional M&A. That old strategic word comes up: synergies.
For starters, Disney has a market cap currently north of $60 billion and that makes this a relatively small deal to accomplish for the Mouse House. This is also far smaller of a purchase price than when Disney paid $7.4 billion or so for Pixar in 2006. The movie business was a $10 billion venture for 2009, and most of this year was still in a recession and at a time when unemployment reached double-digits.
Pixar brought in a solid line-up. Marvel does that and then some with a library of over 5,000 characters featured in a variety of media over seventy years. The Disney family of characters is about to get far larger. The issue being brought up by some is whether Disney can revive or extract the value in all of these hidden, underutilized, or lesser-known characters. The reality is that Disney only needs to accomplish this on a few new blockbuster characters. It is already getting the X-Men, Spider-Man, Fantastic Four, Hulk, and more.
The $4.2 billion figure sounds expensive on the surface. While this was not updated much because of the merger, Marvel’s Thomson Reuters consensus data lists revenue expectations of $507 million for 2009 and $over $659.8 million for 2010. The Thomson Reuters consensus estimate for fiscal year-end September-2010 is $36.8 billion. Marvel’s cash balance was too small to really matter. The entire asset base here is the character line-up and the added existing distribution channel of Marvel that does not overlap with that of Disney.
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