Disney Acquires LucasFilm

 In Acquisition/Investment, News

Every man has his price. – Disney

OCT. 31, 2012 • The Walt Disney Company is purchasing LucasFilm Ltd., for $4.05 billion. The latter is wholly owned by chairman George Lucas, who will receive roughly $2 billion in cash, and the remainder in 40 million shares of Disney stock. Disney is acquring Lucas’ entire entertainment holdings, including the LucasArts video game division, and the Industrial Light & Magic special effects business. The sale will make Lucas the second-largest shareholder in the venerable entertainment company behind the Steven P. Jobs Trust with 137.3 million shares, or 7.7 percent of the Disney’s common stock. Disney intends to repurchase Lucas’ shares within two years.

According to Disney CFO Jay Rasulo, the acquisition was driven almost entirely by the value and financial potential of the Star Wars franchise. Any success from other franchises like Indiana Jones, or divisions such as LucasArts, will be considered an “upside” to the deal. Rasulo also said the LucasFilm valuation is roghly comparable to the value the studio placed on Marvel Entertainment during that acquisition in 2009. So intent is Disney on leveraging the Star Wars franchise that the studio intends to release a new film in 2015, followed by another installment every two to three years. Plans are also being drawn up to create additional Star Wars content for the firm’s theme parks and cable networks. Disney chairman Robert Iger said Lucas will serve as a creative consultant on such major projects. LucasFilm co-chair Kathleen Kennedy will continue on as president of the division, and will report Walt Disney Studios chairman Alan Horn.

Impact: Anyone visiting Disney theme parks recently might have been surprised to find out that Disney did not ALREADY own Star Wars. The studio has been paying Lucas $1 million dollars a year in perpetuity since the 1980s for the theme park rights to Star Wars and Indiana Jones. Lately, Disney put a major effort into upgrading the Star Wars themed Star Tours ride that has become one of the most popular draws at several of its parks. Lucas is clearly all about Star Wars and that is obviously the motivation for the Disney purchase. Like the other major Disney purchases of Pixar and Marvel, Star Wars fits in with Disney’s whole concept of transmedia evergreen type properties that can be used in movies, rides, games and all kinds of merchandise and spinoff. Star Wars is as popular as ever 35 years after its release with $20 billion in licensed goods sales to date. In terms of games, Star Wars will clearly add to Disney’s now massive portfolio of properties. The larger issue is that LucasFilms already has a significant game development studio in its own right with LucasArts. Will LucasArts and Disney Interactive be folded in together or kept as separate entities?  With the Pixar acquisition, animation was put under Pixar, but that was a relatively easy fit since it was all done within the Disney Studios division. For now, LucasFilms will be under Disney Studios, which puts LucasArts under Disney Studios. Disney Interactive is a completely separate division, which could lead to some intra-corporate rivalry. There is already some speculation that LucasFilms may eventually also put under Pixar given how much of the last three films were digitally generated, and the natural fit of ILM and LucasArts with Pixar’s digital storytelling record. Under any scenario, it is unclear what will happen with the LucasArts games division and how it will relate with the Disney Interactive games division.

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