Disney, Pixar Studios Agree on Buyout

By Matthew Bunk, STAFF WRITER

EMERYVILLE — Filmmaker Pixar Animation Studios Inc. agreed Tuesday to be acquired by The Walt Disney Co. in a $7.4 billion deal that will allow Pixar to keep creative control of its award-winning lineup of movies and will restore Disney’s clout in animation.

Pixar Chief Executive Steve Jobs welcomed Disney Chief Executive Bob Iger at Pixar’s Emeryville campus Tuesday to announce that the boards of both companies had agreed to the buyout.

In a conference call, Jobs and Iger stressed the importance of not changing the dynamic and unique culture that has allowed Pixar to become a leader in family entertainment, earning 20 Academy Awards with hits such as “Toy Story” and “Finding Nemo.”

“One of the things that was important to us going into this is that the Pixar culture be protected because it’s such an important ingredient to the success of making these movies,” Iger said. “I’m deeply committed to allowing Pixar to exist in the way that it has been — that’s the single most important thing.”

Pixar will retain its name and its Emeryville headquarters, the companies said in a news release. Not only will Pixar also operate much the same as it does now, but the company also is being called on to bring a little cinema magic to Disney, which recently released the mildly successful “Chicken Little” but hasn’t had a big animated hit since 1994′s hand-drawn favorite “The Lion King.”

Under the deal, Pixar’s creative force, Executive Vice President John Lasseter, will become chief creative officer of the animation studios and principal creative adviser at Disney Imagineering, which designs and runs the theme parks.

Pixar President Ed Catmull will serve as president of the combined animation divisions and will report directly to Iger.

“They will help create a different culture at Disney animation to maximize the talent that’s already there,” Jobs said.

City leaders are hopeful that all the talk about preserving Pixar’s culture means the company and its 800 employees will stay and grow in Emeryville, where it has been since 2000, when it relocated from Point Richmond.

“What we’ve heard so far has been reassuring, but we’ll just have to wait and see,” Emeryville Mayor Ruth Atkin said.

She said Pixar has enriched the community by donating to education funds and through the stewardship of its employees, many of them serving on boards of local nonprofits.

The Pixar campus — a huge gated fortress — holds a soccer field, a swimming pool, a gymnasium and several movie theaters. Its staff meetings are often held in an outdoor grassy amphitheater.

The company has approval to expand onto vacant land next to its campus but has been holding off during the negotiations with Disney, which began in 2003.

Disney and Pixar struck a relationship in 1991 that blossomed with the 1995 release of “Toy Story,” an instant hit. The companies extended the agreement in 1997. Disney receives a 50 percent cut of Pixar’s box office profits in exchange for distributing and promoting the films.

The marriage appeared headed for a divorce in 2004, after the companies broke off talks following a clash between Jobs and former Disney Chief Executive Officer Michael Eisner. But Iger’s ascent to CEO helped get discussions back on track, just in time, as their agreement was set to expire after the release of Pixar’s “Cars” in June. The talks originally focused on Pixar’s desire to keep a greater portion of movie profits but then changed direction and led to the merger agreement.

Jobs said Pixar had many options but decided joining Disney made the most sense because of the company’s vast resources and because it would keep the focus on making quality films.

“With this deal, we can get rid of all the stuff that doesn’t have to do with making movies,” he said.

He added that Pixar had other offers to partner with companies other than Disney but none that fit as well. “Disney was the only company with animation in their DNA.”

For each of their shares, Pixar stockholders will receive 2.3 Disney shares.

Pixar shares rose $1.51, or 2.6 percent, in after-hours trading to $59.08. Disney shares fell 9 cents in after-hours trading to $25.90.

The deal will vault Jobs into an important role at the Burbank- based media conglomerate, which also runs theme parks and the ABC and ESPN television networks. Jobs, who owns more than half of Pixar’s stock and also heads Apple Computer Inc., will become Disney’s largest individual shareholder and sit on Disney’s 14- member board of directors. The move should strengthen Disney’s ties with Cupertino-based Apple and its popular iPod digital music and video player, but critics say it could limit Apple from partnering with Disney rivals.

The agreement still has to be approved by Pixar investors and federal regulators. But Pixar’s investors aren’t likely to derail the agreement because Jobs has already committed to voting 40 percent of the outstanding stock, which he owns, in favor of the acquisition.

Pixar employees reacted positively to the news, even though most refused to comment to the press. The group is known as a creative bunch, and, judging from those entering and leaving the Emeryville campus Tuesday, they are young.

“It’s exciting,” said one twenty-something man dressed in blue jeans and a tan baseball cap when asked what he thought of the merger. He would not give his name.

But neighbors had mixed reactions to Pixar being bought by Disney. After all, Pixar gives Emeryville some clout as the hometown of the nation’s most renowned animation studio.

“Well, I wasn’t particularly happy when I heard about it on the radio, I kind of thought, ‘that’s too bad,’ ” said Paula Mathews, a software engineer who works across the street from the Pixar campus at Kalinda Software.

William Braasch, the founder and chief executive officer of Kalinda, remembers when Pixar moved to Emeryville in late 2000.

“They cleaned up the neighborhood a little,” Braasch said, noting that Pixar’s location had been an abandoned canning factory before Pixar moved in.

Before Continental Can inhabited the space, the campus was a professional baseball field where the Oakland Oaks used to play, he said.

At Emeryville City Hall across the street from the west end of the Pixar campus, officials were hoping that nothing much would change with the Disney purchase.

“What’s the asset at Pixar? It’s their people, who are creative and unique,” City Manager John Flores said. “That creativity is what Disney is buying.”

Business Writer Barbara Grady contributed to this report.