Comcast Shows Discipline

Comcast (NASDAQ:CMCSA) President and CEO Brian Roberts noted recently that the company felt no pressure at all to increase its bid to purchase Disney (NYSE:DIS). At the time that Comcast made its $54 billion bid last month, it offered Disney shareholders a 10% premium per share. But since the deal would be consummated with Comcast stock, a resultant rise in Disney's share price and a slight drop in Comcast's erased the initial premium, and then some.

The message for such a pricing situation is simple: Disney shareholders either expected Comcast to raise its bid, or they expected another company to come in and outbid. Disney's board rejected the Comcast offer as being insufficient, and no other suitors have stepped forward.

Roberts, speaking at an economic conference at Boston College, said: "I don't view a merger with Disney as critical to our business, but it's a great opportunity," adding that the combination of Disney's content and Comcast's distribution "would make both of us stronger than we are apart." Roberts added that he was willing to await both companies' shares returning to a level of equilibrium that he hoped would allow the combination to happen.

Translation: I want Disney, but I want it at my price.

There are two ways you could view this. The first is to admire Mr. Roberts' discipline. Psychologist Robert Cialdini discusses in his book Influence the deep desire of humans to "win" something, even if the cost of doing so becomes higher than the prize. Anyone who's ever stood over the computer as an eBay (NASDAQ:EBAY) auction was ending in a bidding war can attest to this. You've committed $150 to the antique stand-up ashtray, what's another $17.50? This happens writ large when the king-sized egos of corporate titans get involved -- witness the fervor with which Oracle (NASDAQ:ORCL) pursuedPeopleSoft (NASDAQ:PSFT). By refusing to budge on his price, Roberts is showing admirable restraint from pursuing something monumental that he obviously would really like to have.

Or there's the opposite view, the thought that Roberts went in and tried to buy Disney at a time of chaos and was rebuffed. If he's serious about combining Comcast and Disney, he needs to chase the deal. It isn't very smart to let the potential billions in gains for the combined company go idle for the sake of a marginal few billion extra over what he's committed to paying.

As a Disney shareholder, I'd obviously like to see Comcast's offer sweetened. Still, I cannot help but admire Roberts' discipline in waiting for his price, standing by what he calls a "fair and generous offer."

The offer may have been fair, but it was far from generous, it was actually opportunistic. Roberts tried to take advantage of the turmoil surrounding Disney's direction under CEO Michael Eisner. But in the corporate world, it is opportunism and not generosity that makes for better managerial decisions, so Roberts' willingness to wait or not do the deal at all shows that he understands this quite well.

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Bill Mann owns shares of Disney.