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Disney Compares Star Wars Acquisition To Marvel

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Posted by: Matt McGloin, Editor/Publisher
created 11/07/2012 - 1:34pm, updated 11/07/2012 - 1:35pm

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We find out the main reason for Disney's acquisition of Lucasfilm from George Lucas for $4.05 billion was primarily for the Star Wars franchise with Disney comparing the purchase to the 2009 acquisition of Marvel.

As Lucasfilm also includes Indiana Jones, Industrial Light & Magic and Skywalker Sound, in a statement from Disney Senior Executive Vice President Jay Rasulo to investors, Rasulo reveals Star Wars as the company's main focus.

Our valuation focused almost entirely on the financial potential of the Star Wars franchise, which we expect to provide us with a stream of storytelling opportunities for years to come delivered via all relevant platforms on a global basis.

He goes on to mention that if the Star Wars prequels debuted today, adjusting for inflation, each would have made $1.5 billion in total sales.

Lucasfilm has not released a Star Wars film since Revenge of the Sith in 2005. However, adjusted for inflation, as well as growth in both international box office and 3D, we estimate the three most recent Star Wars films would have averaged about $1.5 billion in global box office in today's dollars. This speaks to the franchise's strength, global appeal and the great opportunity we have in the film business.

Rasulo compares their evaluation of Lucasfilm to Disney's previous acquisition of Marvel in 2009, which was purchased for $4 billion as well. He notes that Marvel and Lucasfilm were generating similar numbers when Disney purchased them.

Let me note that in 2012 Lucasfilm's consumer products business is expected to generate total licensing revenue that is comparable to the roughly $215 million in consumer products revenue Marvel generated in 2009, the year in which we announced our acquisition.

Our valuation of Lucasfilm is roughly comparable to the value we placed on Marvel when we announced that acquisition in 2009.

So if we read between the lines, we see that Rasulo is saying that Star Wars will be as lucrative for Disney as Marvel has been, if not more so I would imagine, as Disney seems to be hoping that Star Wars Episode VII and subsequent Star Wars movies will generate a billion plus each. 

You can find the Rasulo's full text below.

You will also notice mention of "Disney-branded TV channels" with Star Wars, which most likely means that Star Wars: The Clone Wars will move from its current home at Cartoon Network to a Disney channel -- something obviously expected.

For more Star Wars news head on over to the Cosmic Book News Star Wars Movie Hub.

 

JAY RASULO, SENIOR EXECUTIVE VICE PRESIDENT AND CFO, THE WALT DISNEY COMPANY REMARKS FOR ANALYSTS REGARDING DISNEY'S ACQUISITION OF LUCASFILM LTD., AS PREPARED

 

Lucasfilm, and more specifically the Star Wars franchise, fits perfectly within the Disney portfolio of intellectual properties and the strategic and financial implications of this acquisition are compelling. Our team has spent a tremendous amount of time evaluating this deal and we have concluded we are uniquely positioned to maximize the value of Lucasfilm's IP in a manner that can generate substantial value for our shareholders above and beyond the purchase price.

In this transaction we will acquire rights to the Star Wars and Indiana Jones franchises, a highly talented and expert team, Lucasfilm's best-in-class post production businesses, Industrial Light and Magic and Skywalker Sound, and a suite of cutting edge entertainment technologies. Our valuation focused almost entirely on the financial potential of the Star Wars franchise, which we expect to provide us with a stream of storytelling opportunities for years to come delivered via all relevant platforms on a global basis.

There are a number of ways our company will derive value from Lucasfilm's intellectual property—some of which can be realized immediately while others will accrue to us over time. George and his team have built Star Wars into one of the most successful and enduring family entertainment franchises in history, as well as one of the best selling licensed character merchandise brands in the U.S. and around the world. However, we believe there is great opportunity to further expand the consumer products business. Today, Star Wars is heavily skewed toward toys and North America. We see great opportunity domestically to extend the breadth and depth of the Star Wars franchise into other categories. We also plan to leverage Disney's global consumer products organization to grow the Star Wars consumer products business internationally.

Let me note that in 2012 Lucasfilm's consumer products business is expected to generate total licensing revenue that is comparable to the roughly $215 million in consumer products revenue Marvel generated in 2009, the year in which we announced our acquisition. With renewed film releases, and the support we can give the Star Warsproperty on our Disney-branded TV channels, we expect that business to grow substantially and profitably for many years to come.

We also expect to create significant value in the film business. We plan to release the first new Star Wars film in 2015, and then plan to release one film every two to three years. These films will be released and distributed as part of our target slate of 8-10 live-action films per year, and will augment Disney's already strong creative pipeline for many years to come. Lucasfilm has not released a Star Wars film since Revenge of the Sith in 2005. However, adjusted for inflation, as well as growth in both international box office and 3D, we estimate the three most recent Star Wars films would have averaged about $1.5 billion in global box office in today's dollars. This speaks to the franchise's strength, global appeal and the great opportunity we have in the film business.

We also expect to utilize Star Wars in other businesses including Parks & Resorts, in games and in our television business. These initiatives were also considered in our valuation.

Under the terms of the agreement, Disney will buy Lucasfilm for $4.05 billion, consisting of approximately fifty percent cash and fifty percent in Disney stock. Based on Friday's closing price of Disney stock, we expect to issue approximately 40 million Disney shares in this transaction. We continue to believe our shares are attractively priced at current levels and therefore, we currently intend to repurchase all of the shares issued within the next two years-- and that's in addition to what we planned to repurchase in the absence of the transaction.

Our valuation of Lucasfilm is roughly comparable to the value we placed on Marvel when we announced that acquisition in 2009. Our Lucasfilm valuation is almost entirely driven by the Star Wars franchise, so any success from other franchises would provide upside to our base case. I realize it may be a challenge for you to quantify our opportunity given the limited amount of publicly available information. But to give you some perspective on the size of the Lucasfilm business-- in 2005, the year in which the most recent Star Wars film was released, Lucasfilm generated $550 million in operating income. We've taken a conservative approach in our valuation assumptions, including continued erosion of the home entertainment market, and we expect this acquisition to create value for our shareholders.

In terms of the impact on our financials, we expect the acquisition to be dilutive to our EPS by low single digit percentage points in fiscal 2013 and 2014 and become accretive to EPS in 2015.

Our capital allocation philosophy has been consistent since Bob took over as CEO. In addition to returning capital to shareholders, we have invested, both organically and through acquisitions, in high quality, branded content that can be seamlessly leveraged across our businesses. Our acquisition of Lucasfilm is entirely consistent with this strategy, and we're incredibly excited by the prospect of building on Lucasfilm's successful legacy to create significant value for our shareholders.

 
 

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