January 24, 2006 – Disney Announces an Agreement to Purchase Pixar for $7.4 Billion
“…We had to return to the glory days of animation. So I began focusing on how to do that, and it really begins with finding the right people. The more I thought about it, the more I realized that Pixar had more of the right people than probably any other place in the world, from an animation perspective.” – Bob Iger, CEO, the Walt Disney Company.
On January 24, 2006, new CEO Bob Iger announced that Disney had agreed to acquire Pixar for 287.5 million shares of Disney stock, which equaled about $7.4 billion. Because Steve Jobs owned 49.8 percent of Disney shares, his vote was the only one that mattered, and it became a done deal. “We’re convinced that Bob really understands Pixar,” Jobs said in an interview on On The Money, “and we think that we have some appreciation of Disney and love the unique Disney assets, like being able to get the characters in the theme parks and really express them through all of Disney’s incredible assets. And we think we understand how to keep Pixar being Pixar, and how to spread some of that culture around…a few other parts of Disney as well, ’cause we think we’ve got something pretty good going here.”
The road to this acquisition was not a smooth one by any means. Although Pixar had been the studio with hit after hit, Jobs was involved in a feud with the Walt Disney Company over the negotiations of their contract. It was public knowledge that Michael Eisner and Steve Jobs were not getting along. Jobs had reached out to Roy Disney for a conversation to share his grievances. Unfortunately for Disney, Jobs had come up with his own solution: After Pixar had completed the terms of the 1997 contract, Pixar would provide no more films for Disney, as long as Eisner was in charge.
As Pixar and Disney approached the end of their deal with no clear solution in sight, the anxious Pixar employees tried to figure out what to do. If they merged with a larger company, they could lose the independent spirit that had made them what they were. The employees “wanted to be an independent company,” Ed Catmull explained, “whereas if we were to become independent, we’d have to take on marketing and distribution, and get another partner, and it would change the culture in ways that we didn’t necessarily want…it was actually unfortunate at that time, because we’d had this phenomenal relationship with Disney all these years, where we were an independent company and they did the distribution and the marketing.” Another source of contention was the fact that Disney could make sequels without Pixar’s involvement. Pixar was heartbroken by this, as they regarded the characters they created like their children – this plan through Disney would make them more like dollar signs than anything else.
Things changed in 2005, when a corporate shakeup within Disney resulted in Eisner’s resignation, and the appointment of Bob Iger as the new CEO of the company. Iger was well known for his accomplishments in the development of Hong Kong Disneyland. Although he could deal well with overseas affairs, it was the domestic affair with Steve Jobs that was more difficult. But Iger was convinced that he would be able to repair the fractured relationship, since Jobs had said that the problem had been between him and Eisner, not the Walt Disney Company as a whole.
Iger’s focus on the rift took a serious turn when he attended the opening of Hong Kong Disneyland in September 2005, a month before he officially became CEO. Iger said that as he watched the opening parade, “[i]t hit me that the characters that were in the parade all came from films that had been made prior to the mid-90s, except for some of the Pixar characters. I felt that I needed to think even more out of the box than I had been thinking, and I had a much greater sense of urgency. I became CEO October 1st. I called Steve around that time and I said I thought we ought to talk, I had some bigger ideas, and that began a long period of discussion, because it was very serious for both sides. He really needed to feel comfortable that Pixar was in the right hands, and, more importantly, respect the talent and the culture.”
Expectations had been high that Iger could repair the fractured relationship, and with the announcement on January 24, Iger had proven that Disney was the best partner there could be for Pixar. The acquisition deal gave Steve Jobs a seat on the board as the largest shareholder, made John Lasseter Chief Creative Officer and principal creative advisor at Walt Disney Imagineering, and elevated Ed Catmull to President of Disney and Pixar Animation Studios. “It feels like this is the true culmination of the building of Pixar and this amazing company into something which will continue on and continue to make waves in the future,” Catmull said about the deal.