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09/20 11:07P (WJ) WSJ(9/21) Basses Forced
To Sell $2 Billion Of Disney Shares selling
hasn't been a major problem, but sustained market declines raise
the odds that this could change and that
the forced selling could
snowball.
Various Bass family members, led by Sid Bass, have been among
Disney's largest
and most prominent shareholders since 1984, when they helped
the company fend
off corporate raiders and installed Michael Eisner as
Disney's chairman and chief
executive. Since then, Sid Bass, a celebrated Fort
Worth, Texas, investor, has played
mentor to Mr. Eisner, who has relied heavily
on Mr. Bass's advice and public
support, particularly as Disney's performance has
flagged in recent
years.
The Disney shares were sold at the below-market price of $15 a
share.
Without elaborating, Disney said that, through Goldman Sachs Group Inc.,
it bought 50 million of its shares
at discounted prices from what it described as
"significant stockholders." The company also said that Goldman Sachs
had purchased 85
million Disney shares. Goldman said it resold those shares in
the market. The sales represent about 6.4% of the
2.1 billion Disney
shares
outstanding.
At its peak, that stake was valued at $5.88 billion. Nonetheless, the
Bass family still has made a killing on
Disney stock. It bought its original 24.9%
Disney stake for just $300 million, according to Clive Bode, the spokesman
for Sid
Bass. acknowledging
that the company had incurred "near-term costs as a result
of the attcks," including loss of
TV ad revenue, but said it is "still too
soon to quantify the impact on Disney's
financial results." Other
Disney
businesses, such as retail stores and theme parks, also have suffered, but
the company said those businesses have "improved
with each passing day."
In
general, Disney expressed "confidence in the long-term outlook for its
media and entertainment businesses and
continued strength of its
brand."
Although Disney stock fell $1.52, or 8%, to $16.98 yesterday in 4
p.m. New York Stock Exchange composite
trading, Goldman's purchase and resale of the 85
million shares appear to have garnered a tidy profit for the
blue-chip
securities firm and its customers. That is because the transaction was done
at a discount price of $15 a share. At yesterday's
close, that would
have
generated paper profit for the buyers of $168.3
million.
Brothers Robert and Ed Bass weren't involved in yesterday's
selling.
Mr. Bode, the spokesman for Sid Bass, said that not all of the sale
was in response to a margin call: "We
had liquidity issues. Some of them were related to
margin, some were not. We resolved them all." He added, "Our
liquidity event is
over. . . . I do not foresee any significant asset sales on
an ongoing
basis." While normal buying and selling of investments would
continue, there would be nothing on the scale of
today's Disney transaction, "or even
close," he said.
He added that the Basses have an "absolutely
high" level of confidence in
Disney management. "Sid and Lee both view the Disney investment as good
then, good now. They didn't want to do it
[sell the stock], but you buy assets and
you sell
assets."
The Basses' Disney stake was in the early 1990s divided up among the
various family members, who have separately managed
their own holdings. No
single family member
held more than 5% of Disney's shares. According to
people
familiar with the matter, Sid Bass and other family members sold the
majority of their Disney shares in the
transaction, but do retain a diminished stake in the
company.
Mr. Bode said Sid Bass first told Disney Tuesday night that he
was
considering selling the stock. That set off a scramble by Disney and
Goldman Sachs to organize an orderly
sale of the shares yesterday morning.
Disney earlier in the
week issued $1 billion in bonds, some of which was
earmarked for share buybacks;
according to people familiar with the matter, the
company has now purchased about 55 million of
its shares this
week.
Goldman didn't know about the impending Bass sale when it sold the
bonds on Monday, according to a person
familiar with the
deal.
Most individuals were far less hard hit than the Bass brothers by the
stock market's drop. At Citigroup Inc.'s
Salomon Smith Barney unit, there was
a "modest increase" in
margin calls, "but nothing significant," said spokeswomanHe added that the
Basses have an "absolutely high" level of confidence
in Disney management. "Sid and Lee
both view the Disney investment as good then,
good now. They didn't want to do it [sell the stock], but you buy assets
and you sell
assets."
The Basses' Disney stake was in the early 1990s divided up among the
various family members, who have separately managed
their own holdings. No
single family member
held more than 5% of Disney's shares. According to
people
familiar with the matter, Sid Bass and other family members sold the
majority of their Disney shares in the
transaction, but do retain a diminished stake in the
company.
Mr. Bode said Sid Bass first told Disney Tuesday night that he
was
considering selling the stock. That set off a scramble by Disney and
Goldman Sachs to organize an orderly
sale of the shares yesterday morning.
Disney earlier in the
week issued $1 billion in bonds, some of which was
earmarked for share buybacks;
according to people familiar with the matter, the
company has now purchased about 55 million of
its shares this
week.
Goldman didn't know about the impending Bass sale when it sold the
bonds on Monday, according to a person
familiar with the
deal.
Most individuals were far less hard hit than the Bass brothers by the
stock market's drop. At Citigroup Inc.'s
Salomon Smith Barney unit, there was
a "modest increase" in
margin calls, "but nothing significant," said spokeswoman He added that
the Basses have an "absolutely high" level of confidence
in Disney management. "Sid and Lee
both view the Disney investment as good then,
good now. They didn't want to do it [sell the stock], but you buy assets
and you sell
assets."
The Basses' Disney stake was in the early 1990s divided up among the
various family members, who have separately managed
their own holdings. No
single family member
held more than 5% of Disney's shares. According to
people
familiar with the matter, Sid Bass and other family members sold the
majority of their Disney shares in the
transaction, but do retain a diminished stake in the
company.
Mr. Bode said Sid Bass first told Disney Tuesday night that he
was
considering selling the stock. That set off a scramble by Disney and
Goldman Sachs to organize an orderly
sale of the shares yesterday morning.
Disney earlier in the
week issued $1 billion in bonds, some of which was
earmarked for share buybacks;
according to people familiar with the matter, the
company has now purchased about 55 million of
its shares this
week.
Goldman didn't know about the impending Bass sale when it sold the
bonds on Monday, according to a person
familiar with the
deal.
Most individuals were far less hard hit than the Bass brothers by the
stock market's drop. At Citigroup Inc.'s
Salomon Smith Barney unit, there was
a "modest increase" in
margin calls, "but nothing significant," said spokeswomanSusan
Thomson.
The picture has been similar at online brokerage firms.
"While
margin-maintenance-call activity is at higher levels than in the summer,
it doesn't approach the historical
figures we've seen in the past," said Steven
Gomer, a spokesman for Charles Schwab
Corp.
One big reason margin calls aren't higher is that many individual
investors have sharply cut back on borrowing.
At Charles Schwab, for instance, customer
margin debt totaled $11.5 billion at the end of the second quarter,
down nearly 50%
from a peak of $21.8 billion at the end of the first quarter
of 2000. Overall, debit
balances in margin accounts of customers of
NYSE-member firms fell to $165.25
billion in July, down from a peak of $278.53 billion
in March
2000.
For Disney, the Bass family sales continued a brutal stretch of bad
news since the terrorist
attacks in New York and Washington. The company's
stock has already been pummeled
because of concerns about the soft
advertising
market and the declining travel business, which is already taking a bite
out of its important theme-park unit.
Disney shares have fallen 28% since
the market
reopened.
Disney was fighting off corporate raiders in 1984 when the Bass
family emerged
as large and influential shareholders, amassing a stake of nearly
25%, and Sid Bass played an important role in
putting Mr. Eisner in place to runthe
company.
Since then, Sid Bass has remained mum about his investment in Disney,
but he has clearly been an important adviser,
supporter and close friend to
Mr. Eisner. "We
discussed everything from arbitrage to architecture, family
to finance," Mr. Eisner
wrote in his book "Work in Progress." Mr. Eisner
wanted Mr. Bass at his side during
Disney's final negotiations in 1995 to buy Capital
Cities/ABC Inc., and later referred to him as his
"partner."
Mr. Eisner has apparently been able to count on support from the
Basses even when other shareholders have gotten
antsy about the company's performance and
strategy in recent years. Mr. Eisner frequently cites Sid Bass's
continuing support, and the
implied endorsement from Mr. Bass has helped Mr. Eisner
fend off criticism of the company. Mr. Bass
appeared at Disney's 1997
annual
meeting, when Disney and Mr. Eisner were criticized by shareholders over
Mr. Eisner's pay package and the
expensive severance package it had just issued to
former Disney President Michael
Ovitz.
---
Randall Smith contributed to this
article.
(See related story: "Thursday's Markets: Recovery Hopes Fade as
Decline Hits Fourth Day" -- WSJ Sept. 21,
2001)
(END) DOW JONES NEWS
09-20-01
11:07
PM
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