Book Review : Main Street U.S.A. Versus Wall Street

Storming the Magic Kingdom by John Taylor (Knopf: $18.95; 251 pp.)

In reporting the struggle for control of Disney productions, John Taylor is telling the quintessential Disney story of innocence and goodness menaced by the forces of evil. While “Storming the Magic Kingdom” is a solidly researched and factual account of the events leading up to the takeover of the company by a coalition of corporate raiders and financial manipulators, the book has all the qualities of an animated film.

Imagine Snow White, Mickey Mouse and Donald Duck stampeded by voracious bulls and bears, then finally driven into the sea where they’re set upon by sharks and piranhas. Would the story of an attack on a soup company, a pharmaceutical empire or a publishing house exert the same fascination? Not likely, though similar dramas are enacted daily in American boardrooms. The financial stakes can be just as high, the effect upon the founders every bit as traumatic, the implications for the economy even more significant, but as long as the dividends keep coming, stockholders tend to accept these changeovers with equanimity.

Bonds of Nostalgia

Disney, however, has a special lock on the national imagination. In the 50 years since the debut of the familiar cartoon characters, three generations have formed emotional bonds with the Disney name and image. Once you discount the sentimental attachment, the Disney saga is not only a model of the raiders’ methods but an outline of the steps involved when an “undervalued” company attracts the attention of the conglomerateurs. The industry is suddenly “in play”; the game afoot.

On June 9, 1984, in the midst of festivities marking Donald Duck’s birthday, the chief executives of Disney were confronted with a hostile takeover campaign--so called because the instigator intended to seize control of the stock, sell the Burbank studio and most valuable real estate holdings to other investors and keep only the immensely profitable theme parks for himself. The future of the actual film studio was never mentioned.

The mastermind of this scheme was Saul Steinberg, the king of corporate raiders, a man with a record of 25 such acquisitions. To Steinberg, Disney represented merely another set of numbers, essentially no different from brake shoes, semiconductors or oil leases. The notion that this particular company saw itself as a force upholding and celebrating fundamental American values did not occur to him, though the Disney management had always seen itself in this lofty role. Passive acquiescence to the offer was out of the question, even if agreement would mean considerable profit for the officers and shareholders.

Institutional Investors

But while they regarded their properties as a national treasure, the Disney management had apparently overlooked the fact that much of the company’s stock was no longer primarily in the hands of small, like-minded shareholders, having long since found its way into the portfolios of institutional investors--banks, pension funds and insurance companies. Such investors don’t take the kiddies to Saturday matinees, nor are they likely to choke back tears at the prospect of Disney Productions changing its name to Amalgamated Whatever or even vanishing altogether. What touches institutional investors is the bottom line, and the Steinberg offer was a generous $10 a share over the current market price.

It was soon obvious that the Disney executives were babes in toyland--total strangers to the complex and sophisticated world of bankers, brokers and speculators who play and win at the takeover game. Indeed, a lack of worldliness was as characteristic of the company as of its product, in which the wicked are punished and the good triumph. More than just 3,000 geographical miles separated Disneyland from Wall Street. They were a continent apart in philosophy and attitude.

By 1984, more than a million shares of Disney stock were held by Shamrock Holdings, controlled by Roy E. Disney, Walt’s nephew. During the preceding year, the monetary value of that stock had declined by $30 million, a drop caused partly by the enormous cost of the Florida Walt Disney World; partly by neglect of the film company, which had made the whole empire possible. Though Taylor is non-judgmental about all the characters involved, Roy E. Disney emerges as a passive figure, caring more for yacht racing than business management, interested only in the Disney nature films and completely indifferent to commercial entertainment projects.

Sell--or Fight Back

In fact, there had not been a box-office smash since “The Love Bug” in 1969. For 16 years, the company had been concentrating on the parks; Roy Disney himself had branched out into a variety of unrelated ventures suggested to him by his astute business manager. Now he was abruptly confronted with the prospect of selling out and betraying a sacred trust, or of fighting for the active control he showed little evidence of wanting; a hard choice complicated by bitter divisions within the Disney family. While Roy was the major stockholder, Walt’s chosen successors ran the company with no help from him. The takeover attempt catapulted him into a maelstrom he had spent decades avoiding.

The book is a detailed chronology of various plans devised, altered and rejected in the following months, enlivened by sketches of the principal players, several of whom changed allegiance without notice. Taylor is particularly adept at working the vivid terminology of the sport into the narrative, explaining the functions of white knights and junk bonds, the strategies of selling off the crown jewels, leveraged buy-outs and surrender to the greenmailers, while describing the disadvantages of each option. While these desperate defense maneuvers usually fail to save a company, in this case there was an ending to delight the most finicky audience.

In the very last frame, the revived and invigorated Walt Disney Co. stock split 4 for 1 and continues to sell at the highest price on record. Under radical new leadership, the studio is producing films like “Down and Out in Beverly Hills” and “Ruthless People”; not precisely glorifications of traditional American values, but aren’t those also “in play”?