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Disney to Buy Lucasfilm

Zacks Equity Research

Amid a difficult operating environment, The Walt Disney Company (DIS) continues to deploy its capital toward its core strategies, which include enhancing the portfolio of its globally recognized brands, to drive long-term growth. One such move is the company’s recent agreement to acquire Lucasfilm Ltd.

Disney agreed to acquire George Lucas’ Lucasfilm Ltd. for a cash and stock deal worth $4.05 billion. Disney stated that it will pay half of the amount in cash and will issue 40 million shares on closure.

Walt Disney is one of the world’s largest diversified entertainment companies and commands a formidable portfolio of globally recognized brands, primarily its namesake brand – Walt Disney, followed by ABC, ESPN, Pixar and Marvel Entertainment. These renowned brands offer a strong competitive edge to the company and bolster its well-established position in the market against major players like News Corporation (NWSA) and Time Warner Inc. (TWX).

As per the agreement, Disney will get hold of Lucasfilm, including its renowned ‘Star Wars’ and Indiana Jones franchises. Further, Disney will also acquire the operating businesses of the company, including live-action film production, animation, visual effects, consumer products and audio post production. Moreover, Kathleen Kennedy, the current Co-Chairman of Lucasfilm, will be the President of Lucasfilm.  

We believe the acquisition will not only fortify Disney’s position but will also expand its world-class portfolio of content while creating long-term opportunities by driving revenue growth through its multiple platforms, which include theme parks, consumer products, media networks and studio entertainment.

We maintain a long-term Neutral recommendation on the stock. Moreover, Disney currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

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