The Walt Disney Company, effectively started in 1923 with young Walt Disney promoting "Alice Comedies" (shorts that blended live action and animation), faced a troubling time six decades later. It had peaked in the 1950s with Disney producing the feature-length cartoons that had brought him fame and fortune as well as live-action television programming and a theme park, Disneyland. Ever the dreamer, Walt Disney announced yet another theme park centered on the "Experimental Prototype Community of Tomorrow" (EPCOT) in 1965, just one year before his death.
Disney's company continued beyond him, first under the leadership of his brother, Roy. Roy retired in 1971 after the launch of Disney World, handing the reins to a series of CEOs and presidents who would oversee numerous projects in film and real estate, such as another Disney theme park in Tokyo. The 1980s were packed with innovation. A cable "Disney Channel" unique from the long partnership with the American Broadcasting Corporation (ABC). Meanwhile, Touchstone Pictures began to produce films and television not suitable for the family-friendly Disney brand.
While the Disney company was truly a mainstay of the American zeitgeist, it had suffered through a rough patch of productions. Disney had released three animated features, The Many Adventures of Winnie the Pooh, The Rescuers, and Pete's Dragon in 1977, but only The Fox and The Hound had been released since, and it was four years later along with the departure of famed animator Don Bluth. The much-anticipated The Black Cauldron faced production issues that delayed it again and again with rewrites and disappointing test screenings deeming it too scary for children. Live-action productions like Condorman and Something Wicked This Way Comes had been box-office flops. One of the most memorable Disney productions, 1982's TRON, was scarcely recognized as a Disney product.
Without a recent big win, Disney threatened to fade away from prominence, yet there were some who saw potential where others saw a has-been. As journalist Peter Behr later wrote in the Washington Post,
"Disney's stock was languishing at less than $60 a share in November 1983. At that stock price, a raider could acquire the entire company for a little over $2 billion. But the pieces of the Disney empire were worth far more than that if sold separately. The Disney theme parks alone could bring $2 billion, experts estimated. The Disney film library of 25 animated classics -- Bambi, Pinocchio, Snow White and the rest -- plus hundreds of live-action films, cartoons and television programs were worth anywhere from $250 million to $1 billion. And that still left the extensive Disney real estate holdings. Disney was a bargain."
Saul Steinberg, who owned 12.2% of Disney's stock, found his numbers knocked down to 11.1% due to Disney issuing more stock to cover the purchase of Arvida, a Florida real estate company. Steinberg sued to stop the stock issuance, saying that it would only add to the company's debt and largely served to keep the jobs of board of directors. Federal court allowed the purchase, as well as another Disney bid to buy Gibson Greetings, so Steinberg made a move to seize Disney. Teaming with other investors such as "movie mogul Kirk Kerkorian... the majority stockholder of MGM-UA," Steinberg's Reliance Holdings announced on June 8 plans to buy up 49% of Disney stock, paying up to $72.50 per share.
Longtime Disney executive Roy E. Disney, Walt's nephew who had started at the company as an assistant director for the nature documentary True-Life Adventures, attempted to rally investors to save the company. He had resigned in 1977 feeling that the company was without creative direction under CEO Ron Miller, Walt's son-in-law, but he maintained his seat on the board of directors. Disney's lawyer, Stanley Gold, had warned Roy E. about the undervalued stock and saw potential for a quick profit. Already disillusioned, Roy. E. was happy to sell.
Steinberg's raid went successfully, and he made tremendous moves slimming down the company. Real estate and publishing were quickly spun off, and the true blow came as Walt Disney Productions was purchased by Rupert Murdoch's News Corporation, who added it to its acquisitions with 20th Century-Fox in hopes it would challenge Universal Pictures' partnerships with Amblin Entertainment. The mediocre box office response to Disney's Mistress Masham's Repose about Lilliputians in England made the studio an easy sale, especially with DIC Entertainment bristling about potential infringement with their The Littles television series on Disney's former ally network, ABC. Within a few years, the "Disney" name would die away, leaving on the tradition with films such as Don Quixote and The Emperor and the Nightingale.
Although the theme parks did well into the 1990s, they stymied under the encroachment of other amusement park brands like Six Flags and Universal Studios. Steinberg had attempted to sell Disney World to Universal, but investors found that without the connection to updated animated features, the parks lost ground. Instead, Fox would purchase the Florida properties, retooling Cinderella's Castle into Anastasia's Castle from the groundbreaking animated film. Many other rides were replaced, such as Splash Mountain becoming the infamous Titanic ride with its cold plunge. EPCOT soon became SFX-laden grounds for X-men and Star Wars franchises. Disney characters, eventually collected by Fox, would be relegated to a corner of the park nicknamed "Yesterdayland."
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In reality, Roy E. Disney, Stanley Gold, and others launched the "Save Disney" campaign, buying up shares for their own internal takeover. The board worked out a deal with Steinberg to buy his 4.2 million shares for $70.33 apiece, fifteen dollars above the stock price, as well as $28 million for "out of pocket expenses." Ron Miller was soon replaced by Michael Eisner from Paramount, who brought along Frank Wells from Warner Brothers and Jeffrey Katzenberg to be the new head of Disney Studios. In 1989, the "Disney Renaissance" began with The Little Mermaid, which grossed $235 million on a $40 million budget. Films like Beauty and the Beast, Aladdin, and The Lion King would do even better.
Behr also wrote that Steinberg's raid may have just been an act, "buying up a company's stock, threatening a takeover and then allowing the company to buy back the stock at a premium in a legal maneuver known as 'greenmail.'"
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