Deals

Tara Lachapelle is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

They say the entertainment industry is tough. So is making the right acquisitions. But Walt Disney Co. seems to be doing just fine. 

Three years ago, the $188 billion film, theme-park and television giant acquired George Lucas's Lucasfilm Ltd. and inherited a gold mine in the "Star Wars" franchise. It was a $4.05 billion bet that Disney could repeat the success it had with Marvel Entertainment (and before that, Pixar).

Disney, led by CEO Bob Iger, paid about $4 billion for Marvel in 2009 and within three years released "Marvel's The Avengers." The film raked in $207.4 million during its opening weekend in the U.S. and Canada, setting a record that was only broken this year with the release of "Jurassic World," according to Box Office Mojo.

On Thursday, Disney releases "Star Wars: The Force Awakens," which BoxOffice.com predicts will generate ticket sales of $223 million in its North American debut -- a new record. There are even projections that the movie could eclipse "Avatar" with more than $2.8 billion of total box-office revenue. That's not counting related sales that could come from video games, toys, TV-licensing deals, etc. 

Just like that, Disney is turning a ton of goodwill into shareholder value. Other dealmakers wish it always worked that easily. 

Decade of Disney
Big purchases for its movie-studio division have helped propel the stock.
Source: Bloomberg

Disney's stock has already blown past most of its peers. Since completing the Lucasfilm purchase in December 2012, its share price has more than doubled, while a basket of entertainment stocks tracked by Bloomberg Intelligence advanced 65 percent over that span. 

Whistle While You Work
Disney's sales have risen at least 3 percent each year since 2010. Analysts project annual gains of 6 percent to 7 percent for the next few years.
Source: Bloomberg

Analysts project Disney's revenue will rise about 7 percent in fiscal 2016 (ending next September), helping to fuel an 8 percent boost to adjusted net income. That's not bad considering that Standard & Poor's 500 members are forecast to increase sales at about 5 percent on average for the 2016 calendar year, according to data compiled by Bloomberg.

This is a time when companies are so starved for growth that some are making acquisitions in which the strategic or financial soundness is being called into question. And so Disney stands out as one that is both growing and shrewd in its approach -- or, simply lucky that such a lucrative franchise built by someone else was theirs for the taking.

The timing is also fortuitous, given that Disney's TV division is facing some concerns over cord-cutting and skinny bundles. (Networks including ESPN and ABC Family generated 44 percent of Disney's $52.5 billion of sales last year, while 14 percent came from its movie studios).

The Lucasfilm deal came mere months after the release of "Marvel's The Avengers," and those transactions were only three years apart, as were the Marvel and Pixar acquisitions. And now, at about the three-year point since Disney bought Lucasfilm, the biggest question may be: What does Bob Iger do next? 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tara Lachapelle in New York at tlachapelle@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net