Marvel Entertainment, Inc. (MVL) shares rallied after the news of its acquisition by Walt Disney Company (DIS) hit the market. The shares of Marvel jumped to close at $48.37 on August 31, 2009 — up nearly 25.2% from the previous day’s close.

Walt Disney would acquire Marvel for cash and stock for approximately $4 billion. Marvel shareholders would receive in aggregate $30 per share in cash and approximately 0.745 Disney stock for each Marvel stock they own. This amounts to $50 per share, which is 29.4% higher to Marvel’s closing stock price of $38.65 on August 28, and is 36 times the Zacks Consensus Estimate of $1.38 per share in earnings for fiscal year 2009.

The purchase of Marvel Entertainment is to be Disney’s largest acquisition since 2006, when it had purchased Pixar Animation Studios for $7.4 billion. The deal is expected to close by the end of the year.

The deal entitles Walt Disney to Marvel’s strong global brand and world-renowned library of more than 5,000 characters, which include iconic characters such as Iron Man, Spider-Man, X-Men, The Incredible Hulk, The First Avenger: Captain America, Fantastic Four and Thor. The deal also provides Disney exclusive control over Marvel’s licensing, publishing and film production divisions.

Walt Disney has long been dominated by female-oriented characters such as Hannah Montana, Cinderella and Snow White, but has been struggling to achieve similar success with male characters. The acquisition of Marvel provides Disney with brands and characters targeting young males.

Walt Disney expects its near-term earnings to fall, partially due to the issue of 59 million new shares for this deal, and partially due to the planned release of two costly potential blockbusters, ‘Thor’ and ‘The First Avenger: Captain America’ in 2011. The earnings are expected to turn around only in 2012. Disney’s shares closed down 3.0% on August 31, 2009 at $26.04.
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