Colin Devroe on a kayak

Everything Colin

A collection of the things that I write, share, make and dream.

Why did Disney only pay $4B for Lucasfilm, ILM, and Skywalker Sound?

When I first read the news that Disney was acquiring Lucasfilm, ILM, and Skywalker Sound all in one deal I tweeted that I didn't understand how all of these companies - along with the rights to Star Wars, partial rights to Indiana Jones, Lucas Arts and much, much more - were only worth $4 billion. But I may have figured it out; George Lucas knows they are worth more but wants Disney, and only Disney, to takeover the reigns. And, Lucas will make boatloads of dough on this deal too.

I'm not alone in wondering though.Jason Kottke:

Crazy. A non-Lucas non-prequel Star Wars film will hopefully be pretty great, but the purchase price is puzzling. Only $4 billion?

According to my research Lucasfilm, ILM, and Skywalker Sound have a combined team of thousands of employees. No doubt some of these will not be making the transition to Disney. But this is a solid workforce.

Take a look at ILM's Wikipedia page. That is some filmography. At my count I see at least three if not five blockbuster releases per year. Depending on how those deals were structured, I'd be surprised if ILM didn't get some sort of royalties for some of those films long after they've debuted. Not to mention the work done on Bluray/DVD releases.

And ILM's pipe seems pretty full too. They have nine deals in the bag all of which are pretty high-budget projects.

And, even though Skywalker Sound is relatively small, they own the IP for THX and work on arguably the best films released each year. Perhaps they too can structuresweetheartdeals.

So Disney, without a doubt, got a steal of a deal. But, we have to look at this transaction a little differently than just looking at the face value because Lucas took half of the money in Disney stock.

The $4 billion was split; half cash, half stock. Disney is promising to make Star Wars a much more international hit. As it stands, a huge percentage of the revenue from Star Wars comes from toys bought in the US. Disney can bring Star Wars to China, Japan and other nations where toys are a huge hit. Just not Star Wars toys. And, presumably, they can do something special in all of their parks worldwide to bring people into the parks. They can also fund, manage, and distribute new Star Wars releases, movies, games, toys - and George Lucas doesn't have to lift a finger.

Brian Warner:

The fact that Lucas is taking half the deal in stock is a sign that he sees this transaction as an investment for the future, instead of just a quick way to cash out. Considering the fact that Disney’s stock is up more than 32% this year, from a low of $38 to a recent 52 week high of $53 per share, Lucas’ payday could increase by hundreds of millions, if not billionsof dollars.

So Lucas now owns 40 million shares of Disney. Effectively doubling his personal net-worth with a single signature. Some analysts project they will bank more than $30B on this sale in short order. Their stock is already up two points (that's $1.8B in market cap) and it isn't even lunch yet. To Lucas that's $40M more than he expected. So I guess Lucas knows exactly what he's doing.

  • 1 November 2012

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