Eisner Needs a Little Ugly Dust to Save the Kingdom

It appears Disney chief Michael Eisner is not going to give up without a fight. Comcast has offered $26 per share for Disney, but if Eisner accepts the bid, he will surely be canned after 20 years at the helm. So instead, he has hired Goldman, Sachs -- for $50 million or so -- to figure out how to get out of this mess. Even as I write, scores of investment bankers are huddling in conference rooms, being fed Chinese food intravenously until they come up with a way out.

But I think I can help him. Here is what I would tell him for the price of this newspaper. In Wall Street-speak, Eisner should invoke the Nancy Reagan defense and then the Pac Man defense in order to buy time to “get ugly” and “join the club.”

The Nancy Reagan defense is “Just say no,” or, as Timothy Leary corrected her, “Just say no, thank you.”

Disney has started this defense by turning a cold shoulder to Comcast. It should have let me write the press release: “We are turning down Comcast’s offer because, uh, don’t they just string wires on telephone poles? Who wants to own that? Their stock has been a dog for the last five years. We don’t want their stinking piece of paper.”

Of course, that could leave the board of Disney open to shareholder lawsuits for not honoring its fiduciary duty to maximize shareholder value. Yeah, like it’s going to start now?

More fun would be the Pac Man defense: Don’t run away -- run over the fruit and become the aggressors. Announce that Disney would like to make a bid for all of Comcast. That would certainly turn things around. But to really annoy Comcast, do a take-under. Comcast’s stock closed Thursday at $30.25. Send a message to Wall Street and tell them what you think it’s really worth. Bid $27. That’ll show them.

Now comes the hard part: Get ugly. You’ve got to make Disney so ugly, so hideous and disgusting that no one would ever want to own it. Start buying stupid stuff, like the Henson Co. (Oh, Disney already bought some Muppets?) Also start selling really important things. Sell the ABC television network and stations to Barry Diller’s InterActiveCorp. He’s always wanted it anyway.

Go into debt up to your eyeballs and buy back your stock. Make your balance sheet so putrid that no one would want to try to fix it. Forget about someone else bidding for Disney. Didn’t Disney’s “Shrek” show us that white knights don’t kiss ugly princesses? Oops, that was DreamWorks.

Comcast’s E! Entertainment and Golf Channel are not prime properties. So it’s held hostage to exorbitant fees when it buys content. The Comcast concept pitched to Wall Street was to buy AT&T; Cable and swing a big ax of leverage, commanding bulk discounts. It’s not working out that way. Disney keeps raising the price for ESPN, and Comcast has no choice but to pay. Wait until Time Warner doubles the price of HBO for the final “Sopranos” season.

Comcast needs ammo to fight back. That’s where Disney’s channels would have come into play. After taking over, Comcast could have said, “How about we cancel ESPN in all of Time Warner’s cable cities?” This is why Rupert Murdoch and News Corp. bought DirecTV, to have ammo in the cable channel wars.

Disney can join the cable oligopoly club too, but it needs to buy all the small cable companies -- Adelphia, Cablevision, Charter and maybe Cox as well. What the heck, pay cash, it will make Disney even uglier. But do it fast. Once you are a cable company, Comcast, which already has too many subscribers, won’t be allowed to buy Disney. It will have to set its sights on Viacom instead, unless Viacom preempts and bids for Comcast first.

So there you have it: $50 million in advice. If Eisner doesn’t take it, every investor should run for the hills. It means Disney is already ugly, that Eisner sees something terribly wrong today and is more than happy to rip the cord of his golden parachute and have Comcast fix his problems.