Following months of speculation The Walt Disney Company hasacquired Pixar in an all-stock transaction that is expected to be finalised by thesummer.
Under the terms of the deal 2.3 Disney shares will be issued foreach Pixar share. Based on Pixar's fully diluted shares outstanding, this putsthe transaction value at $7.4bn.
Ed Catmull becomes president of the combined Pixar and Disney AnimationStudios, and John Lasseter is named chief creative officer. Pixar chief SteveJobs joins Disney's board of directors.
The move, which was approved by the boards of both companies andis subject to clearance under standard merger and closing conditions, representsa massive coup for Disney.
The studio has acted as co-financier and distributor of Pixarfilms for the last 15 years, an Oscar winning slate that has generated more than$3bn in worldwide ticket sales and included Toy Story, Toy Story 2, MonstersInc, Finding Nemo and TheIncredibles.
However two years ago it emerged that the partnership might endafter lengthy talks failed to guarantee Pixar the greater slice of revenue soughtby company chief Steve Jobs.
Under that deal Disney put up half the production costs in returnfor 50% ownership and a hefty 12.5% distribution fee.
Jobs famously locked horns with former Disney chief executiveMichael Eisner and began shopping around for a more lucrative deal with other distributorsas the 2005 year-end contract termination date approached.
New Disney chief executive officer and president Bob Iger hadother ideas, however, and swiftly established himself as a bridge-builder oncetalks between the companies resumed.
Animation is a key driver in the Disney model, and the new deal enablesit to leverage the Pixar brand across its various platforms, which include filmand television production, new technology platforms, and the highly lucrativeglobal theme parks.
Lasseter, who reports directly to Iger, will design newattractions at Disney's theme parks in his additional role as principalcreative advisor at Walt Disney Imagineering. Catmull will report to Iger and WaltDisney Studios chairman Dick Cook.
Pixar is currently in production on the final film under the old agreement,Cars, which Disneywill release on Jun 9.
"With this transaction, we welcome and embrace Pixar's uniqueculture, which for two decades, has fostered some of the most innovative and successfulfilms in history," Iger said.
Iger went on to say: "The addition of Pixar significantlyenhances Disney animation, which is a critical creative engine for driving growthacross our businesses.
"This investment significantly advances our strategicpriorities, which include - first and foremost - delivering high-quality, compellingcreative content to consumers, the application of new technology and globalexpansion to drive long-term shareholder value."
"Disney and Pixar can now collaborate without the barriersthat come from two different companies with two different sets ofshareholders," Jobs added.
"Now, everyone can focus on what is most important, creating innovativestories, characters and films that delight millions of people around theworld."
"Pixar's culture of collaboration and innovation has itsroots in Disney Animation," Catmull said. "Our story and productionprocesses are derivatives of the Walt Disney `school' of animated filmmaking.
"Just like the Disney classics, Pixar's films are made forfamily audiences the world over and, most importantly, for the child ineveryone. We can think of nothing better for us than to continue to make greatmovies with Disney."
The Disney Board was advised on the deal by Goldman, Sachs &Co and Bear, Stearns & Co. The Pixar Board was advised by Credit Suisse.
Separately, the DisneyBoard approved the repurchase of approximately 225 million additional shares,bringing the company's total available authorization to 400million shares.