Disney Buyout of Steinberg’s Stake Defended

Walt Disney Co.’s former chief financial officer testified Thursday that raider Saul P. Steinberg might have made “at least” a $1.2-billion profit if he had taken control of the company at the price he proposed in 1984. The assessment was based on management data on the “breakup” value of Disney’s assets at the time.

As a witness in a so-called greenmail trial, retired Disney executive Michael Bagnall said he believed Steinberg “was trying to steal the company” when he offered $62.50 a share for a 49% stake. Bagnall supported the company’s thesis that its purchase of Steinberg’s 11% interest for $77.50 a share (including expenses) was a bargain, even though it was above the market price at the time.

Since June 27, a Los Angeles Superior Court jury has heard testimony in two civil suits alleging that Steinberg, Disney and the 11 people who sat on Disney’s board in June, 1984, and two investment banking firms violated their fiduciary duty to Disney shareholders.

One suit is a class action representing persons who sold their Disney stock when the market plunged after the Steinberg buyout. Present stockholders brought the other suit on the company’s behalf. Bagnall was called as a witness by plaintiffs, but he made points for defense positions in the case. Unlike two other former Disney executives who testified earlier, Bagnall was not a 1984 director and is not a defendant.

James E. Lyons, an attorney for the Disney directors, asked Bagnall about a controversial Disney acquisition, Arvida Corp., at the time Disney was defending against Steinberg. Confirming that Arvida brought the company $150 million in operating profits in its first three years, compared to its $200-million cost in Disney stock, Bagnall called it “an outstanding result.”

He also testified that a major reason for soaring earnings since 1984 was that Disney was “more aggressive in the pricing of the parks.” He agreed with Steinberg attorney Arthur Liman that this was really “a polite way of saying” that it raised the prices at Disneyland and its Florida theme parks.

The witness also agreed that Disney’s professional advisers all said the Steinberg buyout was “a good deal.” Asked if he would rescind the deal today if he could, Bagnall said, “Absolutely not.”