Defiant Disney says 'no' to bid

The Comcast deal is undervalued, Disney says

The board of entertainment giant Disney has unanimously rejected a takeover bid by cable firm Comcast, and endorsed its much-criticised chief, Michael Eisner.

Any "legitimate proposal" to enhance shareholder value, would be considered but Disney argued Comcast's $54bn (£29bn) price-tag was too low.

It led to dissident shareholder Roy Disney calling again for chief executive Michael Eisner to be removed. Comcast expected the refusal, but said its offer was "more than generous".

"We maintain the belief that our merger proposal represents a sound and compelling proposition for both sets of shareholders," the firm said.

Earlier the Disney board had said: "The interests of shareholders... would not be served."

Roy Disney and ally Stanley Gold, who both resigned last year from the Disney company board, have called for Eisner to resign.

In a letter he said the unsolicited Comcast bid to take over Disney was fresh evidence that the firm was mismanaged.

Meanwhile Comcast officials stood by a statement released on Monday that said the company's offer was fair.

At the close of Wall Street on Tuesday, Disney was down 2 cents at $26.90. Comcast rose 85 cents, or 2.8%, to $30.75.

Paper problems

One problem for proponents of the deal is that Comcast's offer is funded wholly by its own shares, which have fallen sharply since the bid was announced.

Although the shares were worth $54bn when the deal was first mooted on 11 February, that value sank as low as $48bn on Friday.

For the Disney board, that represents a significant undervaluation.

Disney shares ended the week at $26.92, but the Comcast offer effectively values them almost $4 cheaper.

But Comcast argues that its pricing is fair, given the depressed share price Disney was suffering before the takeover bid was announced

And analysts have pointed out that the company has time on its side, holding out the possibility that its own shares - and therefore its buying power - could recover.

Confidence call

The rejection of the deal was expected.

The board is standing behind Mr Eisner

Less predictable was the solidity of the board's support for Mr Eisner, who has come under mounting attack in recent weeks.

Mr Eisner did much to build Disney from a film studio into a global entertainment brand, but his judgement is now being called into question by a vocal group of shareholders.

He is attacked for not understanding the cartoon business, and for having overspent on acquisitions in the theme-park business, an area where the company is currently faring especially badly.

And his autocratic management style has angered many, in particular traditionalists who remember the company's roots as a family business.

Nonetheless, the board insisted it had "confidence in the business, financial and creative direction of Disney under the leadership of Michael Eisner and his management team".