January 27, 2006
If I Were Still a Pixar Shareholder, Would I be Happy?
Posted by Christine Hurt

Pixar shareholders will get 2.3 shares of Disney stock in exchange for their Pixar stock.  Pixar trades at $60 or a little less, Disney trades at $25 or a little more.  So, 2.3 shares of Disney stock are worth roughly exactly what Pixar shares are worth.  So, what's in it for the shareholders?  Acknowledging that past performance does not predict future performance, let's look at the 10-year history for these stocks:





Over the last ten years, notwithstanding the 2001-ish "non-recession," Pixar has grown on average 11% a year.  Disney's average is half of that.

Of course, the realistic answer is that there doesn't have to be anything in it for the shareholders.  Steve Jobs owns 50.6% of the company.  Pixar is a California corporation, and according to its SEC filing, has the authority to merge with a majority vote of the shareholders.  So, Mr. Jobs votes and all is well.  No premium for all shareholders is necessary.  So, what's in it for Mr. Jobs?  Well, have you looked at the iTunes site lately?  When I received my iPod in December, the video offerings at iTunes (owned by Apple, run by Mr. Jobs) were few and mostly ABC television shows.  Disney owns ABC.  When I looked yesterday, I noticed that 10 Disney short films had been added, as well as 7 Pixar shorts that Disney distributed.  To be fair, iTunes also has some Viacom programming (MTV shows, Comedy Central shows, and Nickelodeon shows), but the site is looking a lot more Disney these days.

Bottom line, the deal may end up being very good for Mr. Jobs, who will be a Disney director and 6% shareholder, and for Apple, but not much of anything for the average Pixar shareholder.  Because of the liquidity of the Disney shares, it's a wash -- shareholders will have something worth roughly $60 either way that can be sold and reinvested.  But there is the possibility that they could have gotten more.

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