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Selling Greece to Disney Solves Europe’s Woes: Alice Schroeder

The following is this columnist’s look into the future of Europe’s debt crisis. A news story on Jan. 5, 2011, may look something like this:

Morgan Stanley topped 2010 global debt-and-equity league tables and broke banking records by representing Walt Disney Co. in its $120 billion acquisition of Greece.

Explaining why Morgan Stanley heavily discounted its fee to win the prestigious assignment, Chief Executive Officer James Gorman said underwriting the deal that brought Greece’s 179 years of independence to an end showed the world his own firm had recovered from the financial crisis.

“When you come that close to a near-death experience, our only focus is to make sure our own company survives,” Gorman said. “How 3,000 years of somebody else’s history is managed is not my problem as long as our clients are well served.”

As one of the terms, Greek Prime Minister George Papandreou took a new role greeting visitors at the new EuroGreece Park located at the Acropolis. To acquire such cultural treasures for Disney, Morgan Stanley arranged the sale, which included $60 billion of common stock and $60 billion of assumed debt.

Goldman Sachs Group Inc. was replaced by UBS AG as adviser to the European Union as part of Goldman’s consent agreement with the Securities and Exchange Commission, in which Goldman neither admitted nor denied civil-fraud allegations in its dealings with investors.

Goldman Stake

Goldman Sachs’s Private Equity Group took a 15 percent stake in Greece alongside Disney. One wing of the European Monetary Union, led by German Chancellor Angela Merkel, argued that Disney and Goldman underpaid compared with Greece’s $333 billion gross domestic product. Others point out that the former sovereign is worthless, because its obligations are growing faster than its citizens’ ability to ever repay them.

In its fairness opinion, UBS said synergies between Greece’s untapped intangible assets and the execution skills of the world’s largest media and entertainment company could close Greece’s 13.6 percent budget gap. No other offers for Greece were received except a proposed merger with the Republic of Albania whose terms included no cash to repay the European Union.

Disney’s decision to buy Greece has been credited to Steve Jobs, CEO of Apple Inc. and Disney’s largest shareholder. In 2009, Jobs told Disney to “dream bigger,” setting into motion a deal that is generating a new series of Disney hit movies and product spin-offs, and transforming the theme-park industry.

Theme Parks

Already under construction are Space Mountain Olympus, the Pirates of the Aegean water theme park covering hundreds of nautical miles, the Little Mermaid Harpoon thrill ride, and “Trojan,” a multimedia adventure that the company reassured shareholders yesterday will not be adult-themed.

Disney CEO Bob Iger has said his favorite idea to improve Greece’s margins is golf-themed cruises aboard three ships -- Aphrodite, Artemis and Athena -- which are scheduled for delivery in 2013 and will stop at many of the 1,400 private islands that Disney acquired in the deal. Experiences like these are expected to substantially increase the number of tourists beyond the 16 million who now visit Greece each year and plug a $45 billion annual revenue hole by wringing euros out of remote sea-locked acreage that had been thought to have no value.

Greek Mythology

Disney also is proceeding with its more controversial plans. “Our own brand, like Greece’s, is so powerful because of our heritage,” says Iger. “They have Aristotle, we have Mickey Mouse. But you’ve got to innovate.”

In the past, Disney rarely attempted entertainment based on Greece’s mythology and early history, the exception being the film “Hercules.” The incest- and rape-filled origins of the Greek pantheon of gods and the prevalence of homosexuality in early Hellenic culture had been deterrents for the family-oriented company. According to the Morgan Stanley filing, Greece offered Disney the opportunity to extend its brand by creating the new “Disney Odyssey Division.”

Not all agree with the move. “This is classic mission drift,” activist investor William Ackman, head of Pershing Square Capital Management, said in a press release. “Modern-day Greece is nowhere near as good a brand as Target, and I nearly lost my shirt on that one.” After nominating himself to Disney’s board, Ackman posted a 40-minute YouTube presentation proposing an alternative, tax-free swap of Greek gaming assets with Wynn Resorts Ltd.

Racy Version

According to Disney spokeswoman Zenia Mucha, the company had already tested the waters successfully for a racier version of Disney with its ABC Family television network. ABC Family’s hit campus satire about sororities and fraternities, “Greek,” has now been renewed for a fifth season. Disney sees potential for cross-sponsorship arrangements from advertisers such as Nike Inc. and Apollo Investment Corp.

The deal, which some say has the potential to outdo the East India Co.’s exploitation of India, also brought Disney a collection of iconic antiquities. Management of these works by the Odyssey Division will enable the company to display them without altering explicit elements.

Disney is nonetheless anticipating protests from religious groups and possibly museums. People familiar with the company say it has bought statuary appendage insurance from Lloyd’s of London. Mucha wouldn’t confirm this, but said, “There are people who think we put subliminal messages of a sexual nature in our movies. At least with the statues there no longer will be Internet debates over whether you can see the male parts.”

“We are proud to be associated with this landmark transaction that reflects the changed global face of commerce,” Morgan Stanley’s Gorman said. “In managing Disney’s recently announced offering for Denmark, we believe our experience executing the Greece transaction will be indispensable to the company’s strategic pursuit of Tivoli Gardens.”

The market was filled yesterday with speculation about similar deals, including reports that Diageo Plc is in discussions with Ireland, Spain and Portugal, three countries known for their alcohol production and consumption.

Calls to a Diageo spokesman weren’t returned.

(Alice Schroeder, author of “The Snowball: Warren Buffett and the Business of Life” and a former managing director at Morgan Stanley, is a Bloomberg News columnist. The opinions expressed are her own.)

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