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Pixar, Disney Talks Reported

Speculation has been swirling.
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Walt Disney

(DIS) - Get Walt Disney Company Report

is reportedly in serious discussions to buy its animation partner, leading studio




A report this morning in

The Wall Street Journal

said that current discussions involve Disney paying a nominal premium to Pixar's current market value of $6.7 billion in a stock transaction. The report comes on the heels of months of speculation about the fate of the Disney-Pixar talks.

The two companies have been partners for over a decade in a relationship that saw Disney distribute Pixar's slate of ultra-successful animated films such as

Toy Story


The Incredibles

. The current agreement comes to term after the release of Pixar's next film


, due this spring.

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A deal would make


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chief and Pixar founder Steve Jobs the largest shareholder in Burbank, Calif.-based Disney, according to the report.

Pixar and Disney had a fractious time of it as Jobs and former Disney CEO Michael Eisner crossed swords frequently. New Disney CEO Bob Iger has worked to salvage a relationship that looked lost. He may have gone a long way to helping Disney's cause by allowing ABC hits such as

Desperate Housewives



to be made available through Apple iPods.

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 well into January, speculation has run rampant on possible scenarios for the Emeryville, Calif., company.

Asked if there was a possibility of a wholesale acquisition of Pixar by Disney, Sanders Morris Harris analyst David Miller told

earlier this month he didn't expect one, adding, "Disney would have to make an enormously compelling offer to Steve Jobs for him to even consider the notion." Miller noted that the lofty price tag on Pixar -- which currently boasts a $6.7 billion market capitalization and would surely demand a takeover premium on top -- would be dilutive to Disney shares.

Miller also said at the time that Disney buying a partial stake in Pixar was within the realm of possibility and 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.

In a research note this morning, Kathy Styponias of Prudential said that despite the dilution in the near term and the likely negative impact Disney's stock would take should it acquire Pixar, the firm believes the deal would make sense both strategically and, eventually, financially.

But after weeks of speculation about a range of possible options at Disney, the


cautioned that negotiations are still fragile and that the companies could back off and forge a less all-consuming plan such as a new distribution deal.

Early Thursday, Pixar was trading up 4% to $59.64 and Disney was down 1.5% to $24.84.