Man Without Qualities

Thursday, February 12, 2004

The Fall Of The House Of Eisner IV: ISS Moons Michael Eisner

Institutional Shareholder Services, Inc. (ISS) has now recommended that shareholders NOT support the re-election of Michael Eisner to the board of the Walt Disney Company. As noted below, such a recommendation is normally very influential with institutional investors.

This is very, very bad for the Disney chairman. Perhaps he should have been a little nicer to the gentleman calling from Comcast who was offering many billions of dollars and a reasonable-sounding business plan. Instead, Mr. Eisner just rebuffed him out of hand. Who told Mr. Eisner that institutional investors like to see the Chairman of a company in their portfolio hang up on suitors bearing very big checks? Fire that person, Mr. Eisner!

The radiance was that of the full, setting, and blood-red moon, which now shone vividly through that once barely discernible fissure, of which I have before spoken as extending from the roof of the building, in a zigzag direction, to the base. While I gazed, this fissure rapidly widened—there came a fierce breath of the whirlwind—the entire orb of the satellite burst at once upon my sight—my brain reeled as I saw the mighty walls rushing asunder—there was a long tumultuous shouting sound like the voice of a thousand waters—and the deep and dank tarn at my feet closed sullenly and silently over the fragments of the “House of Eisner.”

Yes, yes,, yes ... and the internet is going absolutely wild! It makes so much poetic sense that Mr. Eisner's last days should be suffused with the scent of decay and outlandish speculation of complex and devious conspiracies!


Things for Eisner turned worse Wednesday when Institution Shareholder Services, a research firm that advises shareholders on a variety of issues, recommended that Disney shareholders withhold their vote on the re-election of Eisner to the company's board of directors.

Now the news media is faced with a tough issue: Do you lead the news with yet another Democratic presidential candidate getting out of the race or Eisner stepping down?

Oh, he's going to step down alright. Maybe not today. Or tomorrow. But the pressure is too intense not to. Either that, or there's the whole ouster route -- it takes longer, it's uglier and it historically rips a big hole in one's golden parachute, so Eisner would be dumb to fight for too much longer.


It is unlikely that Mr. Eisner's mind will be set at ease by a observable tendency in Wall Street denizens to talk about the Comcast takeover of Disney as if it were a done deal:

"This opens the whole field up," Paul Kim, an analyst at Tradition Asiel, said. "Although the Comcast-Disney thing is big, the more interesting question is what comes after and how will this have a ripple effect on the industry," Kim said. "Every institutional investor here is thinking about what's the next M&A deal down the pike."

Yes, yes. This one's pretty much in the bag. Now let's talk about ripples. It also means Disney is in play, analysts say.

The media don't seen to be paying much attention to the fact that Comcast's share price has fallen substantially since the offer was made. Comcast management may - or may not - have some answering to do when its own shareholders start asking the big questions. But, so far, many people think that there is a "strategic necessity" for Comcast to own Disney. How does one criticize management for doing what's "necessary?"


Disney, of course, owns ABC - and therefore controls ABC News. Interestingly, an astute reader e-mails to point out that ABC News seems to be the only media outlet suggesting that Comcast is not offering to pay nearly enough, and will have to up its offer substantially to prevail. (Some modest increase is of course likely on ordinary deal dynamics grounds - but ABC is suggesting a lot more than that is needed.) In addition, the Disney subsidiary article (1) quotes Michael Eisner as saying that Disney is on the "road to recovery" (And ABC breathlessly opines: Disney's quarterly report indicated that the surge Wednesday might not be a one-day fluke created by excitement over the merger proposal.) (2) quotes an analyst saying "Disney did a nice job over the quarter!" and (3) reports that no one thinks that Comcast is paying too much!

Life in the trenches!

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