Mickey Mouse and Donald Duck are in line to get a series of action hero cousins, including Spider-Man and Captain America, now that The Walt Disney Co. has agreed to buy Marvel Entertainment Inc. in a deal worth $4 billion.
Indicating the potential licensing and media benefits of the business combination, Robert A. Iger, Disney’s president and chief executive officer, said on a Monday conference call that the “popularity of Marvel characters and stories transcends gender, age, cultural and geographic boundaries, and can be told successfully across a wide range of both traditional and new media platforms.”
The addition of Marvel’s portfolio of more than 5,000 characters “presents Disney with a unique opportunity to strengthen its strategic position as a leading global provider of high-quality branded content.”
Tom Staggs, Disney’s senior executive vice president and chief financial officer, noted on the call that the acquisition includes “rights to Marvel’s vast library of characters; many of these are not yet widely known. Over time, we expect to more fully develop these characters across multiple platforms and territories.”
Under the terms of the agreement, Marvel shareholders would receive $30 a share in cash, plus 0.745 Disney shares for each Marvel share they own. The deal is expected to be completed by yearend.
In the fiscal year ended Sept. 27, Disney posted $37.8 billion in revenues, $2.9 billion from consumer products including its portfolio of licensed merchandise. Marvel’s total revenues for the year ended Dec. 31 were $676.2 million, with licensing attributable for $292.8 million, or 43.3 percent of the total. U.S. licensing was responsible for just over a quarter of total revenues, 25.2 percent, while foreign licensing accounted for 18.1 percent. Publishing added $125.4 million to the revenue base, with film production hitting $254.6 million and other revenue sources contributing $3.4 million.
While licensing opportunities for both firms stem primarily from the children’s and teen markets, Marvel does sell some adult logo apparel on its Web site. A Captain America Reborn T-shirt sells for $18, while a Fantastic Four Retro Logo Cap can be bought for $31.99.
According to Mort Gordon, president of licensing firm MG Enterprises, Disney might have some potential to grow its licensing arm via adult apparel and accessories.
“The kids love the characters,” he said. “Can Disney step it up? Probably to some degree. Those movies, when they come out, are blockbusters. Teenagers and adults are watching the movies, which [gross] hundreds of millions for each movie.”
While the average royalty rate is around 6 percent plus 2 percent for advertising, Gordon said licensing royalties for the logo characters under the Disney and Marvel umbrella can be as high as 15 percent.
“Most licensees view them as relatively short-lived, so they are willing to pay higher royalties since the time frame is not long,” said Gordon, explaining that the period to capture the public’s attention is when the movie hits the box office.
Marvel was founded in 1939 by Martin Goodman and was sold in 1986 to New World Entertainment. In 1989, it was sold to Ronald Perelman’s investment arm, MacAndrews & Forbes. The company, which went public in 1991, filed for bankruptcy protection in 1996. Bondholders took control of the company in 1997, naming corporate distressed investor Carl Icahn chairman. Toy Biz bought Marvel in 1998, taking the company out of bankruptcy proceedings.
Marvel said in its 2008 annual report that its operating results last year were bolstered by the releases of its first two self-produced films, “Iron Man” and “Incredible Hulk,” offset by a 15 percent decline in licensing sales. Results this year are expected to be below those of either 2007 or 2008.
The transaction has been approved by the boards of Disney and Marvel but requires approval by Marvel shareholders and customary regulatory conditions.
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