Storming the Magic Kingdom
The 1984 greenmail raid that brought in Eisner and Wells.
Summary
Taylor wrote a detailed account of the 1984 takeover battle for Walt Disney Productions, which was one of the defining corporate control fights of the period.
The company was vulnerable. Its film studio was producing failures, its share price stood well below the value of its constituent assets, particularly the theme parks and the film library, and the founding family's stake had been diluted. Saul Steinberg accumulated a position and threatened a bid. Disney's management, led by Ron Miller and Card Walker, responded with defensive acquisitions including the Arvida real estate business and an attempted purchase of Gibson Greetings, both intended to make the company less attractive and more indebted. Steinberg was eventually bought off with a greenmail payment that gave him a large profit at the other shareholders' expense, which triggered shareholder litigation.
The Bass brothers then accumulated a position, and Irwin Jacobs pursued the company as well. Roy E Disney, the founder's nephew, who had resigned from the board, worked with Stanley Gold to force management change. The outcome was the installation of Michael Eisner and Frank Wells, who ran the company for the next decade.
Taylor's account, based on interviews with most participants, is a close description of how such a fight actually proceeds: the accumulation, the defensive tactics, the role of investment banks on both sides, the litigation and the board's decision-making under pressure.
The book is journalism from 1987 and does not analyse the takeover era's economics. The greenmail and defensive tactics it describes are now largely regulated or contractually addressed, so its value is as a case study of governance under attack and of how a controlled company with undervalued assets becomes a target.
Key takeaways 7
- Disney became a target because its market value stood well below the value of its parks and film library.
- Management responded to the threat with acquisitions designed to reduce the company's attractiveness rather than to improve it.
- Greenmail paid a single shareholder a premium unavailable to the others, which prompted litigation and later regulation.
- A dissident family shareholder working with an outside adviser was the mechanism that eventually produced management change.
- Investment banks advised both sides and profited regardless of the outcome, which shaped the advice given.
- Boards under takeover pressure make decisions on compressed timetables with information supplied by advisers with their own interests.
- An undervalued company with separable assets and weak management will attract bidders regardless of its brand or history.
Who should read it
Directors, founders and investors who want a detailed case study of a hostile control fight and the defensive tactics boards actually used.
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