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Walt Disney on Monday moved closer to the possible acquisition of Pixar, the animated film company worth nearly $7bn, as its board of directors met to mull the transaction.

The Disney directors also were discussing the sale of its radio division, according to people familiar with the matter. The company has entered into exclusive talks with Citadel, a communications group, which is offering about $3bn.

A Pixar acquisition would reinvigorate Disney’s animation department, whose characters are the engine behind the company’s theatrical revenues, consumer products, theme park and other ancillary businesses.

However, some analysts expressed reservations about a deal. Spencer Wang, analyst at JPMorgan, worried that Disney could be buying Pixar at the top of the market for computer-generated animation, and that such a transaction would dilute its earnings. “Net-net, we are wary of a Disney purchase of Pixar,” Mr Wang concluded.

Disney shares closed down 20 cents at $25.52. Pixar, meanwhile, made early gains but finished the day 19 cents lower at $58.27, giving it a market capitalisation just shy of $7bn.

Disney, once synonymous with animation, has struggled to make the transition from hand-drawn cartoons to the computer-generated technology that Pixar pioneered with Toy Story, and followed up with a string of blockbusters, including Finding Nemo and The Incredibles. Rival studio DreamWorks Animation has also used the technology in its Shrek franchise.

In addition to the talent infusion, a deal would draw Disney closer to Steve Jobs, Pixar’s chief executive who also runs Apple Computer. Such a move could help Disney navigate the new digital landscape, in which media companies are increasingly pushing to make their content available on a number of new devices, such as iPods and mobile phones.

In October, Robert Iger, Disney’s chief executive, and Mr Jobs gave their vision when Disney’s ABC network agreed to sell its top-rated television programmes Desperate Housewives and Lost for download through Apple’s iTunes service.

“There is a lot of value in creating a closer long-term relationship between Disney, the premier content company in the world, and Apple, the most innovative consumer company in the world,” said Laura Martin, analyst at Soleil Securities. “If Disney buys Pixar, we would expect closer cooperation between Disney and Apple due to Steve Jobs’ role in both companies.”

Other analysts have expressed concerns about Pixar’s ability to thrive under a larger corporate parent, and whether Mr Jobs would face conflicts of interest if the Apple chief executive were to become Disney’s largest shareholder and a member of the board.

Mr Jobs, for example, could face dilemmas in board discussions about Disney’s technology partners, and whether or not the media company should sell its content on platforms other than iTunes.

Short of an acquisition, Disney could take a strategic investment in Pixar, or find a way to renew a lucrative deal to distribute the studio’s films. The current arrangement is set to expire in June, following the release of Cars.

Copyright The Financial Times Limited 2017. All rights reserved.
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