Crowd Around Pixar

The animation studio's distribution options could expand beyond Disney.
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As

Pixar

(PIXR)

considers potential distribution arrangements,

Disney

(DIS) - Get Report

isn't the only show in town.

The Steve Jobs-run cartoon factory, responsible for some of the world's best-known hits, including

Finding Nemo

and the

Toy Story

franchise, has a deal with Disney that expires after the release of

Cars

, the next feature release, due June 9.

Jobs made it clear throughout the latter part of last year that he expected to have a new deal in place with a chosen distribution partner by year-end. Now that we're heading into the second week of 2006, speculation has run rampant on possible scenarios for the Emeryville, Calif., company.

Pixar shares were up and down last week amid speculation that a renewed Disney distribution deal -- or perhaps even an outright acquisition -- was in the works. Further fueling last week's Pixar feeding frenzy was Disney's decision to back Jobs' other focal product, the

Apple

(AAPL) - Get Report

video iPod, with further content from its ABC and ESPN network stables.

But Credit Suisse First Boston analyst William Drewry warned that much of the upside already had been priced in -- including a renewed deal. And so far, no deal of any sort has materialized.

Asked if there was a possibility of a wholesale acquisition of Pixar by Disney, Sanders Morris Harris analyst David Miller said no, adding, "Disney would have to make an enormously compelling offer to Steve Jobs for him to even consider the notion." Miller notes that the lofty price tag on Pixar -- which currently boasts a $6.8 billion market capitalization and would surely demand a hefty takeover premium on top -- would be dilutive to Disney shares.

But even stopping short of a takeover could prove pricey. Miller says any new distribution deal likely would give Pixar better terms and more control of Jobs' cherished library of films -- some of which, such as

Toy Story

, are partially owned by Disney.

As far as future distribution for Pixar films is concerned, Disney is hardly the only game in town. Asked if Pixar was in talks with other potential distribution partners, Miller -- whose firm does business with Pixar -- said, "Of course they are."

Along with Disney, Pixar might find that

Sony

(SNE) - Get Report

,

Time Warner

(TWX)

and

News Corp.

(NWS) - Get Report

would make the most compelling partners, given those companies' domestic and international distribution strengths.

Disney buying a partial stake in Pixar is still within the realm of possibility. Miller stressed the speculative nature of such a discussion, but said he could envision Disney getting full exclusive distribution rights to all titles and Jobs retaining all other rights, and perhaps a board seat at the Mouse House.

Pixar's Jobs and former Disney dictator Michael Eisner had a contentious relationship. While a renewed deal may seem more likely given cozier relations between new Disney boss Bobby Iger and Jobs, a deal is hardly a

fait accompli

.

"The longer we go without seeing a deal," says Miller, "the chances are that Pixar goes with somebody else -- which is fine with us."

In the meantime, the Disney radio sale, being run on the banking side by Bear Stearns and Goldman Sachs, is said to have slowed to a "painfully slow" pace, according to one source close to the auction. Remaining suitors in what is expected to be a $3 billion deal include

Entercom

(ETM) - Get Report

, private equity firm Kohlberg Kravis Roberts and

Citadel

(CDL) - Get Report

.