The Force: Lucas Sells Out to Disney ... Star Wars Is Coming Back with Disney!

The Star Wars franchise is back! The Walt Disney Company (NYSE: DIS) is acquiring Lucasfilm Ltd. from George Lucas.  The deal is a cash and stock transaction valued at a whopping $4.05 billion. The best news for Star Wars fans is that those remaining three films are finally coming. It really looks like Disney just got a steal.

Upon the closing, Disney will pay out roughly half in cash and some 40 million shares of common stock, subject to customary post-closing balance sheet adjustments. Star Wars and Lucasfilm are now joining the path of Marvel and Pixar to become part of the Disney empire. As part of the deal, Disney will also acquire the portfolio of cutting-edge entertainment technologies under the names Lucasfilm Ltd., LucasArts, Industrial Light & Magic, and Skywalker Sound. The present intent is for Lucasfilm employees to remain in their current locations.

Star Wars fans are going to get theirs all over again. Bob Eiger of Disney said:

In 2015, we're planning to release Star Wars Episode 7 - the first feature film under the "Disney-Lucasfilm" brand. That will be followed by Episodes 8 and 9 - and our long-term plan is to release a new Star Wars feature film every two to three years.

Disney's CFO said that the Star Wars franchise will also be utilized in other businesses including Disney's Parks & Resorts unit, in games, and also in the television business. The company said on future earnings. "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."

When we covered the ten most valuable film franchises by ticket sales, Star wars came in at #3 but would have been #2 in modern day. More important than just the film value is the entire franchise valuation. We put a modern day value in this genre at somewhere around $30 billion on a global basis if you go back all the way to the beginning and count in all aspects of the Star Wars franchise.

When we put a valuation on the Star Wars franchise, we even discussed the long-term possibility of a sale. We noted:

What is the value of all of the intellectual property?  Imagine if George Lucas just decided to put the entire Star Wars brand up for sale.  No one has calculated that value in detail and it would be a guess.  Private equity firms, large media companies, and eccentric billionaires would be clamoring to sign confidentiality pacts to see if they could buy the rights to all of the Star Wars franchise. Owning the rights and intellectual property in the future would be worth much more than just millions of dollars.  Would it sell for $1 billion? $2 billion? $10 billion?

The answer was somewhere in the middle. While the results may drag on earnings initially, it is important to realize that Disney's current market value is almost $90 billion.

JON C. OGG


Filed under: 24/7 Wall St. Wire, Entertainment, Media, Mergers & Acquisitions Tagged: DIS, featured

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