By now, the tale is familiar. Walt Disney Chairman Michael D. Eisner, on a stroll in Sun Valley, Idaho, chances upon Thomas S. Murphy, his counterpart at Capital Cities/ABC Inc. After a few pleasantries, Eisner suggests a merger, and when Cap Cities investor Warren E. Buffett gives his blessing, a $19 billion deal is on its way.
A nice story. Too bad it's a bit of a fairy tale. In fact, for months before the second-largest merger ever was announced, Eisner huddled with key executives to put the gears in motion. With him in Idaho were two team members, Sanford M. Litvack and Stephen F. Bollenbach, perhaps Hollywood's most powerful unknown executives. "The two Michaels are getting all the attention right now," says a Walt Disney Co. veteran, referring to Eisner and new President Michael Ovitz, "but Eisner is counting on these other two to make the place go."
Eisner has acknowledged as much by establishing that Litvack, chief of corporate operations, and Bollenbach, chief financial officer, will report to him, not Ovitz. How that will work is not yet clear, but chances are that as Eisner and Ovitz tend to the creative aspects of forging a $22 billion media colossus, Litvack and Bollenbach will take on wide responsibility to make the parts work in sync. "We envision this as a team operation," says Litvack. "In some companies, they have an office of the president very similar to this."
Bollenbach, who joined Disney in April, is a onetime surfer who grew up in Southern California, worked a summer at Disneyland, and drives a $113,000 Ferrari Testarossa. Litvack, a "walk-on" football player at the University of Iowa who transferred to the University of Connecticut after a knee injury, grew up in Brooklyn, is a grandfather of five, and strives for anonymity. He was thrust into his current role by the 1994 death of President Frank G. Wells, who had hired him three years earlier as general counsel, and by the departure last spring of studio boss Jeffrey Katzenberg.
Today, Litvack and Bollenbach occupy adjacent offices, galvanized as a team by the ABC deal. When Bollenbach came aboard, the merger idea was already under intense scrutiny, he says. He attended four meetings on it, including one just days before Eisner flew to Idaho. At that meeting, when Eisner asked who would help run the combined company, Litvack jotted Ovitz' name on a napkin and slipped it to the CEO.
After the Idaho meeting, Bollenbach and Litvack led the team that put the deal together. Bollenbach, who had prodded the debt-averse Eisner to take on new debt to do the merger, pressed Eisner to seek an all-cash deal, but Murphy initially held out for all stock, Bollenbach recalls. "Our stock has great currency," he says, "and I think the Cap Cities folks knew that as well." By phone three days after their first encounter, Eisner and Murphy split the difference: Disney will pay half stock, half cash.
RAISED EYEBROWS. The final agreement took shape during a weekend of late-night negotiations with ABC executives. The Disney team successfully pressed two key issues: a $400 million payment to Disney if another bid were accepted and a separate agreement for Disney to supply ABC with programming. Sources say Litvack also urged a quick resolution to the $10 billion libel case Philip Morris Cos. had brought against ABC. That may explain the speed with which ABC agreed to a settlement.
Litvack is no stranger to big-league transactions for Disney. As general counsel, he and then-CFO Richard C. Nanula last year handled the often prickly negotiations with representatives of Saudi Prince Alwaleed bin Talal bin Abdulaziz Alsaud, who invested $350 million in ailing Euro Disney. Litvack first represented Disney during his mid-'80s tenure at the New York law firm Donovan, Leisure, Newton & Irvine. Before that, he was the Carter Administration's assistant attorney general in charge of the Antitrust Div. Then, ironically, he signed consent decrees prohibiting ABC and CBS from merging with Hollywood studios. "Different times, different policies," he shrugs now.
If Litvack is the cautious lawyer, Bollenbach is more a buccaneer of the balance sheet, who has worked for such high-profile financiers as the late shipbuilder Daniel K. Ludwig and Donald Trump. His career has been marked by risk-taking. In 1986, as CFO of Holiday Corp., he fought off a Trump takeover with a $1.6 billion special dividend to shareholders, then piled on debt to make the company a major hotel developer. Four years later, he helped Trump avert bankruptcy by refinancing his huge debt load. Bollenbach, Trump says now, is "not afraid of debt, and so far, at least, he's shown he knows how to keep out of its way, too."
Litvack and Bollenbach first met earlier this year at a game of Disney's Anaheim Mighty Ducks hockey team. Bollenbach was still chief executive of Host Marriott Corp., a 100-hotel unit that he helped create in 1993 when Marriott Corp. split into two companies. Bollenbach subsequently moved to Disney at the urging of board member and former CFO Gary Wilson, who had worked with him at Marriott. Soon afterward, he and Litvack were added to the Disney board.
Because Disney's theme parks generate so much cash, Bollenbach soon began preaching the wisdom of borrowing, and he quickly won a convert. "I know all the arguments about debt and its tax advantages," says Eisner, "so I spent a couple of weeks learning about debt and then go out and spend $19 billion with it to buy a company." Bollenbach, working with a bank consortium led by Citibank, put together a $10 billion line of credit that will be presented to Disney's board Sept. 24. He and Litvack have been shuttling to New York to meet with Cap Cities and start the transition. So far, they say, they have focused on merging administrative functions. But in time, company sources say, they'll look at cutting costs by merging TV production and foreign operations.
CROWDED HOUSE. Disney's behind-the-scenes strategists are likely to become even less visible once Ovitz comes on board Oct. 1 and after Cap Cities finally joins the family. While Litvack has been negotiating with Katzenberg, who has threatened to sue for money he says Disney owes him, that task will pass to Ovitz, say insiders. Ovitz will also be charged with finding programming for a Disney-led consortium of telephone companies eager to send entertainment over their wires.
Meanwhile, the merger is expected to close in 1996. Shaping the new company will probably fall squarely on Eisner for now. "No matter how you look at these two guys, any company still has to be a reflection of its chairman," observes former general counsel Joe Shapiro, Litvack's longtime law partner, who introduced him to Eisner and Wells. Another former Disney exec says Ovitz and Litvack will split Wells's old role, with Litvack acting as COO and Ovitz handling high-profile deals and working with creative talent. Bollenbach will focus on financing. Does it sound as if it's getting a little crowded in Disney's executive suite? Could be. But that's a big improvement at a company that, just months ago, was derided for having no management depth.
STEPHEN F. BOLLENBACH
TITLE Senior executive vice-president, chief financial officer
JOINED DISNEY Apr. 4, 1995
PREVIOUS JOBS President and CEO, Host Marriott, 1993-95
CFO, Trump Organization 1990-92
CFO, Holiday Corp. (now Promus)
VP, finance, Ludwig Group
Chairman and CEO, Southwest Savings & Loan
EDUCATION BS, UCLA; MS, Management, University of California at Northridge
SANFORD M. LITVACK
TITLE Senior executive vice-president, chief of corporate operations
JOINED DISNEY April, 1991, as general counsel
PREVIOUS JOBS Member of Executive Committee, Dewey Ballantine 1986-91
Chairman, Executive Committee, Donovan, Leisure, Newton & Irvine 1983-86
Assistant U.S. Attorney General, antitrust division, 1979-81
EDUCATION BA, University of Connecticut; LLB, Georgetown Law Center