Comcast considers dropping Disney bid

/ Source: Financial Times

Comcast is weighing up whether to withdraw its $58 billion hostile bid for Walt Disney as the U.S. cable company's hopes of forcing the embattled media group to the negotiating table fade.

Executives at Comcast are debating whether to drop the all-share offer amid widespread skepticism from investors that it can succeed. No decision has been made, however, and people close to the company stress that Comcast may decide to leave its bid on the table indefinitely.

The debate comes as Disney directors gather today for a long-awaited board meeting at which they are expected to debate a possible succession plan for Michael Eisner, chief executive, whose contract is due to expire in 2006.

The two-day board meeting, which was scheduled before Comcast launched its offer in early February, is expected to consider the question of succession for other senior Disney executives, as well as Mr. Eisner.

However, several large investors have called for Disney's board to oust Mr. Eisner following an unprecedented shareholder revolt at the company's annual meeting last month over corporate governance issues and what they see as Disney's underperformance.

Mr. Eisner agreed to give up his role as Disney's chairman following the meeting, when shareholders representing 45 percent of the company's stock withheld their votes from his re-election to the board.

Disney shares rose sharply after Comcast unveiled its offer but have since given up most of those gains. However, Comcast shares have remained under pressure amid investor worries that the company might raise its bid. Based on Friday's closing price of $28.92, Comcast's offer values each Disney share at $22.55. Disney shares closed at $24.65.

Any move by Comcast to improve its offer would be self- defeating, analysts and investors say, because it would probably prompt a further fall in the company's share price.

Brian Roberts, Comcast's chief executive, has also repeatedly stressed that the company has no intentions of raising its bid, although he continues to defend the strategic logic behind the combination of content and distribution that such a deal would represent.

Mr. Roberts has walked away from deals before, most notably when he withdrew Comcast's bid for MediaOne, the cable group, after AT&T, the telecommunications group, launched a rival bid. Comcast would be free to renew its offer at any time if the situation at Disney changed.

"Ultimately, we believe that Disney's days are numbered as a standalone content production company," Jessica Reif Cohen, an analyst at Merrill Lynch, wrote in a note to clients last week.

Comcast is due to update investors on its performance on Wednesday when it reports first-quarter results. Both Comcast and Disney declined to comment.