Scepticism as Disney buys Muppets

EMBATTLED Walt Disney chief Michael Eisner may be disappointed in his belief that the announcement of a takeover of the Muppets will restore his tarnished crown as media king.

Many observers are sceptical that the acquisition of the franchise from the Jim Henson company will either make up for a series of perceived mistakes by Eisner or prove much of a defence against Comcast's bid for the company.

One analyst said: 'He gave up Pixar, the most sophisticated and profitable hi-tech animation operation in the world, and he has gained a bunch of furry puppets. I'm not exactly in awe of his business judgment.'

The Henson deal does not include the Sesame Street characters, such as Big Bird and Oscar the Grouch, who were sold earlier.

But the move should go some way to easing criticism of Eisner and the rest of the Disney board for not taking Comcast's takeover bid seriously enough.

Many shareholders demanded that the bid be more closely examined and, if found wanting, the board to come up with their own 'big idea'.

Disney executives can now point to their move on the Muppets as evidence they have not run out of creative steam, though in truth the company has been chasing Henson's creations for years. The first tilt at the company fell apart shortly after Henson's death in 1990. There are signs, too, that it is a declining asset.

Henson's family sold the company to Munich-based EM.TV in 2000 for $680m (£359.5m) but bought it back last July for less than $90m.

Disney will not say how much it will pay but news agency reports suggest it picked it up for $40m to $60m. Disney hopes to close the deal within two months.

The question of whether the puppets will shore up Disney's defences against Comcast may be moot in any case.

Comcast insiders say that the cable company does not plan to raise its offer for Disney. With the share price run-up that followed the announcement of the bid, Disney is now worth considerably more than the $50bn on the table.

Comcast publicly says it will neither abandon the bid nor lose interest in Disney, but many on Wall Street believe Comcast is trying to talk down Disney's shares and, more importantly, talk up its own share price by reassuring investors that it will not overpay for the entertainment company.

Indeed, Disney shares did edge lower yesterday while Comcast's rose by more than $0.90 to $30.82.