Disney Mulling Comcast Bid

Updated from 11:14 a.m. EST

Comcast (CMCSA) launched a bold hostile takeover bid for Disney (DIS) Wednesday, saying its efforts to draw beleaguered CEO Michael Eisner into merger talks had been rebuffed.

The media giant said it would evaluate the cable titan's offer. Disney shares surged and Comcast's fell as investors considered the implications of the huge move.

Comcast shocked Wall Street Wednesday by offering to swap some $54 billion in stock for the storied entertainment behemoth. The cable giant termed the deal a perfect match of Disney's content and Comcast's distribution. "This is an incredibly compelling combination," Comcast CEO Brian Roberts said at a press conference Wednesday morning.

Disney responded first by posting blowout fiscal first-quarter earnings and later by saying it would consider the bid in due course.

Disney "has received and will carefully evaluate the unsolicited proposal from Comcast Corp.," the company said in a late-morning statement. "In the meantime, there is no action for shareholders to take.

"Today and tomorrow, the company will present to Institutional Investors and Analysts at a previously scheduled conference its broad array of unique and valuable businesses, as well as the strategies being deployed to fully realize the tremendous long-term value of those assets," Disney added.

Rejection

Comcast offered to exchange 0.78 of a Comcast Class A share for each Disney share, valuing the Disney shares at $26.47 on the basis of Tuesday's close. On Wednesday morning, Disney surged 15% to $27.61, while Comcast slid 8% to $31.23.

The proposed deal's overall value is $66 billion, including about $12 billion of assumed debt. Disney shareholders would end up with about 42% of a combined company. Prior to the offer, Comcast's two share classes had a combined market value of about $76 billion, while Disney was worth about $49 billion.

Comcast said it launched the bid after Disney chief Eisner refused to enter negotiations over a friendly merger. The bid comes as Eisner fends off criticism from dissident board members, most notably Roy Disney, the nephew of founder Walt Disney, and from Stanley Gold, about supposed creative and operational failures at the conglomerate, whose holdings include theme parks, movie studios, the ABC television network, the Disney Channel and ESPN.

Roberts lamented Eisner's unwillingness to negotiate a friendly deal in a letter to him and the Disney board.

"I am writing following our conversation earlier this week in which I proposed that we enter into discussions to merge Disney and Comcast to create a premier entertainment and communications company," Roberts wrote. "It is unfortunate that you are not willing to do so. Given this, the only way for us to proceed is to make a public proposal directly to you and your board."