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Disney Bids $4 Billion, Bags Star Wars

By Tim Beyers - Oct 31, 2012 at 5:10PM

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We've never seen a licensing empire like this before

Much as my inner nerd loves Geeknet's wares, few companies can rival Walt Disney (DIS 3.30%) when it comes to investing in geeky goodness. Just last week, the House of Mouse revealed the new trailer for Iron Man 3. All signs point to another potential blockbuster.

You know what? The Golden Avenger can step aside. He's no match for Darth Vader and Obi-Wan Kenobi. Last night, Disney acquired Lucasfilm for $4 billion in cash and stock, and with it the rights to the entire Star Wars Universe.

"This transaction combines a world-class portfolio of content including Star Wars, one of the greatest family entertainment franchises of all time, with Disney's unique and unparalleled creativity across multiple platforms, businesses, and markets to generate sustained growth and drive significant long-term value," CEO Bob Iger said in a press release.

Star Wars creator George Lucas positioned the deal as a way to ensure his legacy remains intact: "I'm confident that with Lucasfilm under the leadership of Kathleen Kennedy, and having a new home within the Disney organization, Star Wars will certainly live on and flourish for many generations to come."

Kennedy is president of Lucasfilm. At Disney, she'll act as brand manager for all things Star Wars, in a way mirroring what Marvel Studios President of Production Kevin Feige does for the Marvel brands.

Some important facts about what Disney has and is getting in buying Lucasfilm:

  • As series goes, Star Wars at $1.918 in domestic box office receipts ranks second only to Harry Potter, which earned studio parent Time Warner (TWX) $2.39 billion during its decade-long run in cinemas, according to Box Office Mojo.
  • As box office franchises go, Marvel Comics and Pixar -- which have combined for $8.3 billion in domestic receipts, according to Box Office Mojo -- already rank as first and third of all time. DreamWorks Animation (DWA) ranks second with $3.9 billion.
  • According to the most recent data from License! Global Magazine, Disney-owned images topped all licensors with $37.5 billion in 2011 merchandising sales. Second-place Iconix Brand Group (ICON) produced just $12 billion over the same period. Lucasfilm ranked 15th, pulling in $3 billion. This year could prove even more fruitful thanks to a deal that put Star Wars together with Angry Birds creator Rovio for a new social game coming next month. Hasbro (HAS 2.47%) is producing toys based on the concept.

All of which is great. But is Disney overpaying in bidding $4 billion for Lucasfilm and its 35-year-old space opera? Or, to put it as Admiral Ackbar did in Episode VI: Return of the Jedi:

Sources: YouTube and Lucasfilm.

Let's consider history. Some of my colleagues called Disney's $4 billion buyout of Marvel considerably overpriced at the time. The House of Mouse is getting Star Wars for roughly the same price.

Presuming Disney handles Star Wars in much the same way, we can expect strong box office results, terrific merchandising, and thoughtful personnel decisions -- (cough) Joss Whedon (cough), (wheeze) Avengers (wheeze) -- all of which should add up to materially greater revenue and profits across every line of its business.

Iger should dress up as Vader for Halloween tonight. Or perhaps Obi-Wan or Yoda. Because, either way, he's a Jedi Master who's proving extremely dangerous for opponents to contend with.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Apple, Time Warner, and Walt Disney at the time of publication. He also had a long-term call options position in Netflix. Check out Tim's Web home, portfolio holdings, and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Hasbro, Apple, DreamWorks Animation, and Walt Disney. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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Stocks Mentioned

The Walt Disney Company Stock Quote
The Walt Disney Company
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Hasbro, Inc. Stock Quote
Hasbro, Inc.
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Time Warner Inc. Stock Quote
Time Warner Inc.
Iconix Brand Group, Inc. Stock Quote
Iconix Brand Group, Inc.
DreamWorks Animation SKG Inc. Stock Quote
DreamWorks Animation SKG Inc.

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