Bonds Offer Investors Way To Assess Merger Disney, Cap Cities/Abc Deal Will Require Cash

Walt Disney Co.’s expected sale of $5 billion of bonds to finance its acquisition of Capital Cities/ABC Inc. will give investors a chance to pass judgement on last year’s biggest U.S. merger.

And plenty of buyers are likely to vote “yes” on the Burbank, California-based entertainment company’s bonds, investors said.

Disney’s shareholders Thursday approved the $19 billion purchase of Cap Cities/ABC, a New York-based publishing and television broadcasting company.

Disney needs to borrow about $10 billion to fund the cash portion of the purchase price, with the rest expected to paid in Disney stock, said Stephen Bollenbach, Disney’s chief financial officer.

The company will initially raise the $10 billion by selling commercial paper, short-term corporate IOU’s with maturities of less than a year, and then refinance about half the commercial paper with proceeds from several bond sales, Bollenbach said.

Disney plans to kick off its bond sales with a $1-to-$2-billion sale of global bonds as early as next month, assuming it has obtained regulatory approvals to complete the acquisition from the Federal Communications Commission, the company said.

Most of the global bonds, securities which are sold simultaneously in Europe, Asia and the U.S. and trade around the clock, will have maturities of five to 10 years, the company said.

Disney’s bond sale will be a referendum on its purchase of Capital Cities/ABC, which will make it the world’s second-largest media conglomerate, after Time Warner Inc./Turner Broadcasting System Inc., with estimated revenue of $21.3 billion next year, according to David Londoner, an analyst at Schroder Wertheim & Co.

Some analysts expect Disney to cash in by using its newly acquired broadcast network, ABC, to distribute its movies, which include “The Lion King,” the highest grossing animated film ever, and to promote its theme parks, such as Disneyland in California and Walt Disney World in Florida.