COMCAST CORP. Analysts question offer for Disney

Disney executives are discussing how to increase the company's earnings.
ORLANDO, Fla. (AP) -- Comcast Corp. astounded the financial world with its offer for The Walt Disney Co., yet the cable television giant now faces a daunting task in selling the blockbuster combination -- and investors have already indicated the proposed price is too meager.
Analysts said Disney board members and the financial community are both looking for extremely sound reasons, beyond financial and management abilities, why Comcast thinks the acquisition would work.
"Therefore, while there could be merits in combining content with distribution, we do not believe these are overwhelming, as we have seen with a company such as Time Warner, which has yet to really show the inherent benefit of marrying content and distribution," Jill Krutik, an analyst at Citigroup Smith Barney, wrote in a note Wednesday.
Moreover, two days of meetings between Disney executives and financial analysts at Walt Disney World are likely to reinforce the idea that Disney is on the right track and that Comcast management has yet to offer enough specifics on what it would do differently, some analysts said.
"Looking more closely, the numbers aren't there," said Harold Vogel of Vogel Capital Management, who is attending the analyst meeting, which began Wednesday.
Vogel said Disney managers are making progress toward key goals, including improving the ratings at its ABC Television network.
Combining content, such as Disney's ESPN network, with distribution, such as Comcast's cable subscribers and high-speed Internet customers, could make sense. But Disney has shown it is able to find customers for its content without owning its own cable system or satellite television network.
Details of proposal
Under the merger plan, Comcast said it would issue 0.78 of a share of its Class A stock for each Disney share, and Disney shareholders would retain 42 percent of the combined company. The offer valued each Disney share at $26.49, a 10 percent premium over their closing price Tuesday.
That's a relatively small premium for a takeover offer, but Comcast may be counting on the fact that other potential suitors in the media industry would surely face tougher regulatory scrutiny in Washington. Most of Comcast's holdings are in cable TV systems, while Disney's are in broadcast, cable and "content" businesses such as movie studios.
In a sign that investors expect an extended fight, Disney's shares closed above Comcast's offer Wednesday. They shot up $3.52, or 15 percent, to $27.60.
Disney executives are saying little about the offer but have begun to outline its plans for boosting the company's earnings by double digits each year through 2007.
Chief executive Michael Eisner said the Disney board met Wednesday and asked management to perform an in-depth analysis of the proposal so the board could evaluate it. Eisner did not say how long the analysis would take.