Disney Is Expected to Clinch Pixar Pact

Walt Disney Co. is expected to announce today an agreement to buy Pixar Animation Studios for close to $7 billion after its directors on Monday blessed the deal even as the price was being finalized.

Pixar’s board planned to consider the proposal this morning, said people familiar with the matter. In an all-stock deal, Disney is expected to pay about $59 a share for the company that pioneered computer animation with such blockbusters as “The Incredibles,” “Finding Nemo” and the “Toy Story” films.

In doing so, the Burbank entertainment giant would reclaim its perch as Hollywood’s top animation studio, a position it ceded in recent years as Pixar and DreamWorks Animation SKG tapped into the growing popularity of computer-animated movies.

Neither Disney nor Pixar would comment. Those sources familiar with the matter declined to be identified because talks were continuing.

For more than a decade, Disney has marketed and distributed Pixar’s films, sharing profit and costs. Although Wall Street has been generally enthusiastic about an outright acquisition, some analysts cautioned that Disney directors should closely scrutinize the deal, given the potential risks.

“They have to be careful and deliberate,” said independent media analyst Harold Vogel. “They have to look at the balance sheets, the projections, the financial statements and understand how the future of Pixar releases fit into the Disney structure.”

Vogel also said that Disney’s board should clarify the future role of Pixar Chief Executive Steve Jobs, who would become Disney’s largest shareholder and join the company’s board.

“It may be a fairly lengthy adjustment process,” Vogel added. “Steve Jobs is known to be quite active in everything he does -- he won’t sit back quietly.”

Analysts have cited several risks that both companies face with the acquisition.

Although the deal is widely viewed as a way to revitalize Disney’s animation division and freshen its parks, consumer products and cable networks with new characters, combining a big media corporation with the maverick Pixar presents its own challenges.

SG Cowen & Co. analyst Lowell Singer wrote in a report last week that benefits of the deal could be undone by a potential clash of the companies’ cultures.

“Integration could be the largest risk for Disney in acquiring Pixar,” he wrote.

He noted that preserving Pixar’s artist-friendly culture could prove daunting. He also said that retaining Pixar talent could be difficult because many of its artists thrived in a smaller, free-spirited environment in which staffers ride scooters in the hallways and compete in paper airplane contests.

Pixar’s creative guru, John Lasseter -- who would oversee the companies’ animation operations -- is the only senior executive in the Emeryville, Calif.-based company with an employment contract. In Hollywood, the contracts are standard for high-level studio executives.

Also, Pixar artists have historically received a significant portion of their compensation in stock options tied to the success of the company’s films. Compensation based on Disney’s stock, which has been flat in recent years, might not be as attractive.

Acquiring Pixar is viewed as a big bet for Disney CEO Bob Iger, who is just four months into the top job. Iger has worked hard to mend fences with Jobs, who repeatedly clashed with former Disney CEO Michael Eisner.

Eisner received a nod from Disney’s board Monday when directors broke from their closed-door Pixar talks to attend a ceremony renaming the company’s Team Disney headquarters building after him. Eisner led the company for 21 years before retiring Sept. 30.