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During a series of weekend meetings in New York City, however, a green-mail deal was struck: Disney agreed to repurchase Steinberg's 4,198,333 shares for $70.83 a share, or $297.4 million, a profit of $32 million for Steinberg. In addition, Disney paid him $28 million for expenses involved in his takeover attempt. Steinberg, in turn, agreed not to acquire any Disney shares for ten years.
Immediate howls of protest arose from Disney investors, who were not getting Steinberg's sweetheart deal. In fact, after the agreement was announced, Disney stock slumped sharply and finished the week at $49.50, a drop of nearly $16 in five trading days. Institutional investors roundly condemned the Disney accord, although small investors holding Disney shares mainly suffered in silence. New York City's Alliance Capital Manage ment lost $1.5 million on its 100,000 shares of Disney. Said Chairman Dave Williams: "We feel like we've had the rug pulled out from under us." Three Disney shareholders filed suit in superior court in Los Angeles asking that Disney's purchase of Steinberg's shares be rescinded and that Disney pay a dividend to all shareholders.
While Miller and other Disney executives have survived for now, their company emerges from its battle with Steinberg in a much weakened position. Arvida and Gibson are not natural business partners for Disney, yet they have more than doubled Disney's debt load, to $850 million.
The tactics used by Disney and other greenmail targets came under very strong criticism last week. Said Jay Marshall of Merrill Lynch: "Clearly, in many cases, the executives are just messing up the company. Management's feeling is: cripple us, poke out our eyes and maybe they won't like us any more." That kind of scorched-earth policy may save the jobs of top management, but it does not help investors, who see the greenmailer make a huge profit while their shares decline in value. Said T Boone Pickens, a frequent opponent of entrenched corporate offi cials and a sometime greenmailer:
"Management at Disney is not too different from a lot of other managements across corporate America. The last thing they think of is their own shareholders."
The greenmailing of Walt Disney was successful, but it may change the whole greenmail game. The New York Stock Exchange and the Los Angeles office of the Securities and Exchange Commission are looking into possible insider trading of Disney stock. The SEC had already pro posed legislation that would require stockholder approval of stock buy-back plans, and the Disney debacle is sure to win it support. Moreover, Democratic Congressman Timothy Wirth of Colorado has conducted hearings that may lead to a legislative crackdown on questionable takeover tactics.
— By Robert T. Grieves.
Reported by B. Russell Leavitt/Los Angeles and Adam Zagorin/New York