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Pixar & Disney to Merge - Steve Jobs to become controlling shareholder?

There are rumors floating around that Disney may buy out Pixar and install Steve Jobs as CEO. Today the Wall Street Journal has a page 1 story about a possible Disney/Pixar merger. While I wouldn't be too surprised if Disney & Pixar merged, I would be surprised if Steve Jobs became CEO. Why? Steve Jobs is already CEO of two companies, one of which is already larger than Disney, and both are generally more profitable. As I write this, Walt Disney Company's market capitalization (the total value of all its stock) is about $48 billion. Apple stock is on a roll, and Apple's market cap is up to $72 billion, just recently passing Dell Computer. In three years, Apple's value has grown by a factor of 10. In the meantime, Disney stock has basically been flat. Pixar is worth about $6.7 billion, and Steve owns half of it.

Some might believe that Steve Jobs is too attached to Pixar to part with control. Not necessarily. The article linked below from jimhillmedia.com discusses the history of Pixar. According to the article, before Toy Story, Steve Jobs saw Pixar as primarily a computer hardware and software company; and he tried hard to sell it. Not only that but he continually tried to make cuts on the creative side. Since then, he's seen the light and understands that the creative talent at Pixar is its primary asset, and he's mainly been a hands-off boss.

If Steve really wanted to run Disney, it would be best to just have Apple take over Disney. It would be a relatively simple matter to use the inflated equity in Apple to justify a stock for stock buyout of Disney, arranging a three-way deal with Pixar. By keeping Disney-Pixar as a separate "tracking" stock. Once Steve got Disney-Pixar up to its full potential, Disney-Pixar could be spun off at a large profit for Apple shareholders. There are conflict of interest problems to be worked out because Mr. Jobs would be wearing several hats, each with fiduciary duties, but with votes of independent directors, it would be possible.

There's an outside chance that Jobs might leverage a Pixar buyout into control of Disney. If so, it would be history repeating itself. Jobs gained his current post at Apple after Apple bought out Job's software company, NeXT. Jobs gained a board seat and used that seat to convince the board that his vision was best for the company. He was right. NeXTStep became OS-X. Jobs guided the colorful iMac to market, and the Apple recovery has contined since then.

If Disney bought out Pixar, it's probable that Steve Jobs would get a board seat. He might hold out for more than one. What about John Lasseter, the creative force behind Pixar? Only time will tell.


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