Company Town : Stockholders OK Disney-ABC Deal

NEW YORK —  Stockholders approved the $19-billion acquisition of Capital Cities/ABC Inc. by Walt Disney Co. at separate meetings in New York on Thursday. The deal--combining the movies, theme parks and other assets of Disney with ABC’s broadcasting and cable networks--will be the largest media acquisition ever.

Final approval of the deal awaits Federal Communications Commission action, which may be postponed by the partial U.S. government shutdown. The Disney deal is on the agenda for a Jan. 18 FCC meeting, but staffers who must review the transaction are not yet back on the job.

“Our goal is to grow profits by 20% annually,” Disney Chairman Michael Eisner told Disney stockholders. “We will work long and hard to extend our very broad mandate to every corner of the new Walt Disney Co. . . . and to every corner of the globe.”

Disney Chief Financial Officer Stephen Bollenbach said that Disney took in $12.1 billion in revenue for 1995, an increase of 25% over 1994. ABC has not announced its 1995 earnings, but the company reported revenue of $4.8 billion for the first nine months of 1995, an increase of 9% over the same period for 1994.

Disney shareholders approved the merger by 73%; Capital Cities/ABC stockholders, by 79.5%. Cap Cities/ABC stockholders will receive $65 per share, plus one share of Disney stock, in the acquisition. Disney will help finance the deal by selling $8 billion in one-month to six-month commercial paper.

Making his first appearance as a Disney executive at the annual meeting, new Disney President Michael S. Ovitz said that “with so many media voices, most viewers will go to the brands they know and trust” such as Disney and ABC.

Citing Disney’s formidable cross-promotional skills, successful channels such as ABC’s ESPN sports network, and the potential for selling TV networks and movies abroad, Ovitz said bullishly: “The future is about content (we create it), branding (we have it), marketing (we are the best at it) and distribution (we cover the world).”

Eisner indicated that Disney intends to move ahead with plans to open a second theme park next to Disneyland in Anaheim. “Don’t be surprised if we add another theme park” in Anaheim, he said.

Disney executives said after the meeting that plans for the second park will be announced in a few months.

In addition to expanding networks such as ESPN and the Disney Channel abroad, Disney plans to create programming for ABC’s Saturday-morning schedule. Ovitz said the network will bring back “The Wonderful World of Disney” series beginning in the fall on ABC. Disney also is developing a family-oriented online service, Disney Online, that will carry advertising, Ovitz said.

ABC, which ranks second to NBC in prime time ratings, has the top-rated network news division, local TV stations and cable networks, including the Arts & Entertainment Network, the Lifetime channel and the History Channel. Disney recently hired Geraldine Laybourne, the president of the highly successful Nickelodeon cable network for children, to oversee its combined cable assets.

“This is a terrific deal,” said David Londoner, managing director of the Schroder-Wertheim investment firm in New York. “They’re buying one of the best-managed media companies at 10 1/2 times cash flow. They’re combining their movies and family entertainment with ABC’s news and sports, and they’re thrusting into foreign expansion. Twenty percent a year gets pretty big, but they’ve got a little leverage on the deal. I think they’ll come close to that projection.”

Disney executives said that they hoped the FCC would not postpone its Jan. 18 meeting, but, Eisner said, “I doubt we will be approved until the government gets into full operational force.”

The Justice Department is examining the deal too, but Disney executives said that they do not expect the agency to hold up approval of the acquisition.

At the shareholders meeting, a representative of the United Church of Christ asked Eisner why Disney, unlike Westinghouse Electric Corp. in its purchase of CBS Inc., had not agreed to provide three hours a week of educational programming for children on ABC. Eisner replied that Disney’s objection was to “the government mandating” a specific number of hours of programming for children by the network.

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Several media critics recently have expressed concerns that both ABC’s settlement of a $15-billion lawsuit by the Philip Morris tobacco company and CBS’ decision not to run a “60 Minutes” story on the tobacco industry are signs of a chilling of investigative journalism in anticipation of two new corporate owners. But Eisner, who worked at ABC for 10 years, devoted considerable time in his remarks to emphasizing ABC News’ independence.

“I want to affirm my commitment that ABC News will continue to operate in the public interest, without corporate interference, and with the mission of pursuing the news aggressively, without fear or favor,” Eisner said.

Eisner predicted success for Disney’s upcoming animated version of “The Hunchback of Notre Dame” and said that the company’s live-action films for 1996 will include a version of “101 Dalmatians” starring Glenn Close and a remake of “Peter Pan,” with both movies directed by John Hughes.

Many in Hollywood are eager to see how the “two Michaels,” longtime friends, will work together at Disney. When a stockholder asked Eisner, who has had heart bypass surgery, whether he had changed his lifestyle, Eisner said that he had changed his diet, exercises. He then adding jokingly, “I’ve reduced stress by hiring Michael Ovitz.”

Times staff writer Jube Shiver Jr. in Washington contributed to this report.