MCA Purchase Not in Plans, Disney Insists

Walt Disney Co. President Frank Wells told shareholders Thursday that rival entertainment company MCA Inc. is “not a possible acquisition.”

Wells did not elaborate on his response to a shareholder’s question at the company’s annual meeting, but Disney Chairman Michael D. Eisner later added that “we do not own a share of stock of MCA and never have as a corporation.”

The Disney name is a perennial favorite among speculators who mull the list of companies capable of acting as a “white knight” to MCA, which has attracted mounting interest in recent years as a takeover target. Just last week, MCA said New York real estate developer Donald J. Trump had notified the company that he might acquire up to 24.9% of MCA’s shares.

Disney just ended the most extraordinary year in its history, so the speculation is not baseless. Boosted by its all-time box-office hit, “Three Men and a Baby,” Disney was the industry’s second most successful distributor of films in 1987 and leads the industry so far this year. For the fiscal year ended Sept. 30, 1987, the company recorded an 80% increase in net income to nearly $445 million, on revenue of almost $2.9 billion; the company said its unused debt capacity had increased to $2 billion.

Eisner, asked if he could envision borrowing so great a sum, replied: “Absolutely. But I would have to conceive of a company that would be for sale--and want to be for sale--that was not overpriced.” Eisner said he would not rule out unfriendly bids, but he called such actions unproductive.

Disney and MCA are racing to build costly studio tour attractions in central Florida, and they have vowed to compete in the theme park business in Japan and Europe as well. The companies already operate tourist attractions in Southern California.

Eisner disclosed Thursday, however, that Disney’s plan to build urban entertainment centers in cities such as Burbank has taken a back seat to the company’s effort to develop Euro-Disneyland and the Florida tour attraction.

Eisner said there is a better than 50% probability that an urban entertainment center will get under way in Burbank this year, but he added that the likelihood is less than 100%.

Plans for Park Expand

“The whole entertainment center (project) is slowed down slightly because of the pressure we have on WED,” said Eisner, referring to the subsidiary that designs Disney’s theme parks. “We don’t have enough designers,” the Disney chairman said. “I would say it’s some time off before we break ground, a couple of years maybe. We’re designing it all, but I would say that instead of having 40 people on it, we have five people on it.”

In an interview after the shareholders meeting, the Disney chairman said he expects the Florida tour eventually to cost $500 million instead of the $300 million initially budgeted, due not to cost overruns but to expansion of the initial plans.

Eisner said the company is not increasing the number of sound stages for film and television production but plans to add more rides and features to the studio tour to make it a full-day attraction.

The sound stages are expected to be in full use late this year, but the tour portion of the attraction won’t open until April, 1989, Eisner said.

A 1989 opening of the tour itself appears to indicate a delay. Disney officials told shareholders last year that the Florida attraction would open in 1988, but Eisner insisted Thursday that the project is on schedule.

An April, 1989, launch would still give Disney a head start over MCA, which has said it will begin operating its Florida tour late next year. MCA has never divulged the estimated cost of its project, which is being built as a joint venture with Cineplex Odeon Corp., a movie theater company half-owned by MCA.

No analysts have dared to predict the outcome of two studio tour attractions competing within miles of each other in central Florida, even though two prominent analysts have detected signs of a slowdown in Walt Disney World attendance.

In December, Merrill Lynch analyst Harold Vogel warned that Disney’s price hikes at the admission gate could reduce the “customer base” to the upper middle class, noting that the most recent increase for a three-day pass jumped to $78, up from $70.

‘Significantly Undervalued’

And in a report released Thursday, securities analyst David Londoner said he believed that attendance at Disney’s parks had actually declined 3% in the company’s first quarter, which ended Dec. 31.

Eisner refused to comment on attendance, although he said park revenue and operating income had increased for the first quarter and year to date.

Despite the question of park attendance, Londoner issued a strong recommendation on behalf of his company, Wertheim Schroder in New York. “We like Disney because it has simply the finest real fundamentals of any stock we have ever analyzed,” the analyst wrote. He termed Disney’s stock as “significantly undervalued” while it trades in the mid-$50s, or 15 times estimated earnings. (Disney stock closed Thursday at $57.625 a share, down $1.375, in composite trading on the New York Stock Exchange.)

The annual meeting, held for the first time outside California or Florida, attracted just 300 shareholders, compared to the 6,000 who attended last year’s meeting in Anaheim.

Eisner said this year’s site was selected to honor the boyhood home of the company’s founder, Walt Disney, who made his first film here before bankruptcy prompted him to leave in 1923 to join his brother, Roy O. Disney, in Los Angeles, where a successful studio was eventually founded.

Roy E. Disney, a nephew of the late Walt Disney and vice chairman of the company’s board of directors, said Thursday that he has discussed with the city’s mayor the possibility of building some kind of memorial to his uncle.

Walt Disney was born in Chicago in 1901 and spent his early years on a Missouri farm before moving in 1910 to Kansas City, where he spent the next seven years. After a stint overseas with the American Red Cross during World War I, he returned to Kansas City in 1919.

The Disney family home on Bellefontaine Avenue has been listed on the National Register of Historic Places, as has Disney’s original studio for Laugh-O-Gram Films. The former Disney home is still used as a residence, but the studio in a deteriorated neighborhood on East 31st Street appears boarded and locked.