Disney buys Pixar in $7.4bn deal

Pixar's profits make it a tasty target for bigger firms like Disney

Walt Disney has agreed a $7.4bn (£4.1bn) deal to buy Pixar, the animation firm behind films including Toy Story and The Incredibles.

The all-share deal will see Pixar chief executive Steve Jobs join Disney's board of directors.

Under the agreement, 2.3 Disney shares will be issued for each Pixar share.

Disney's distribution deal with Pixar was due to end this year, and it seemed the two would split after failing to agree on how to divide future profits.

However, Disney's new boss Robert Iger has been working to revive relations between the two companies.

Embrace Pixar

We welcome and embrace Pixar's unique culture, which for two decades has fostered some of the most innovative and successful films in history Robert Iger, Disney chief executive Pixar takeover boosts Jobs

The deal is a turnaround for Mr Jobs, who fell out with former Disney boss Michael Eisner and said he would walk away from the current distribution deal when it expired this year, following the release of new movie Cars.

Mr Jobs, who is also the boss of Apple Computer, controls more than half of Pixar's stock.

"Disney and Pixar can now collaborate without the barriers that come from two different companies with two different sets of shareholders," Mr Jobs said.

The loss of Pixar would have been a blow for Disney, as demand for the company's films, as well as DVDs, videos and merchandise, has proved to be very strong.

"With this transaction, we welcome and embrace Pixar's unique culture, which for two decades has fostered some of the most innovative and successful films in history," Mr Iger said.

"The addition of Pixar significantly enhances Disney animation, which is a critical creative engine for driving growth across our businesses."

Creative force

Disney's earnings from Pixar's six films are estimated to be about $3.2bn.

However, analysts said that the real value to Disney was the talent the deal would bring in-house, especially Pixar executive vice-president John Lasseter, the man credited as being the creative driving force at the firm.

Under the deal, Mr Lasseter will become chief creative officer of the combined animation studios as well as principal creative adviser at Walt Disney Imagineering, the company behind Disney's theme parks.

Disney is seen to have fallen behind other animators, and its latest cinema releases have failed to set the box office alight.

"The price tag is a little more than people were expecting," said Dennis McAlpine, an analyst at McAlpine Associates.

Both sides expect the deal to be completed by the end of summer this year.