Question: In September 2009 The Walt Disney Company announced that it

In September 2009, The Walt Disney Company announced that it would acquire Marvel Entertainment in a $4 billion cash and common stock deal. On a per-share basis, the consideration given by Disney to Marvel shareholders represents a 29 percent premium over Marvel’s share price at the date of acquisition. Disney acquires the more than 5,000 characters in Marvel’s library, including Iron Man, Spider-Man, X-Men, Captain America, and the Fantastic Four. Exhibit 7.41 presents the Condensed Consolidated Balance Sheet of Marvel at the end of its June 30, 2009 second quarter.

Required
a. From a strategic perspective, discuss why you believe Disney would make this acquisition.
b. Assuming that the assets and liabilities of Marvel approximate their individual fair values at the date of acquisition, compute goodwill.
c. This is a 100 percent acquisition. What role does the 29 percent premium play in the computation of goodwill? If this were a less than 100 percent acquisition, how would the 29 percent premium affect the computation of the noncontrolling interest?
d. Disney will record a decrease in its cash and an increase in its shareholders’ equity totaling $4 billion at the date of acquisition. Contrast the rest of the financial statement effects on Disney’s own records and on its consolidated balance sheet between two scenarios: Marvel is dissolved (a merger) and Marvel continues to exist as a separate legal entity (an acquisition).
e. It is unlikely that the assets and liabilities of Marvel as shown in the condensed quarterly balance sheet approximate their individual fair values at the date of acquisition. Indeed, some of Marvel’s most valuable resources might not be recognized on their balance sheet. As a result, the entire excess acquisition price is not likely to be assigned to goodwill. Identify items that are likely to receive a portion of the allocation based on the differences between their book values and fair values.


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  • CreatedJune 23, 2012
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