Disney May Sell Newspaper and Magazine Operations

Walt Disney Co. on Tuesday confirmed rumors for the first time that it is exploring divesting the newspaper and magazine operations it inherited when the company acquired Capital Cities/ABC for $19 billion early last year.

The move, which analysts believe will fetch more than $1 billion, had been predicted because the papers and magazines don’t fit well with the entertainment and theme park giant’s strategy. In addition, Disney officials believe there are only limited synergies between the publications and the company’s film, television, theme park and merchandising operations.

Disney owns a small group of newspapers that includes the Kansas City Star and Fort Worth Star-Telegram, as well as such publications as Institutional Investor, Women’s Wear Daily and Los Angeles magazine. The company also owns a batch of more obscure trade publications ranging from Industrial Safety & Hygiene News to Indiana Prairie Farmer.

Disney officials said that a variety of scenarios is possible, including selling the assets in pieces, spinning off the group or swapping the publications for assets that Disney wants. Harold Vogel, an entertainment analyst with the Wall Street firm Cowen & Co., said he believes Disney will get more than $1 billion, with $1.4 billion his high-end estimate.

The announcement came as Disney’s first-quarter earnings exceeded Wall Street estimates, aided by strong theme park attendance, the performance of the ESPN cable sports operation and the films “101 Dalmatians” and “Ransom,” and the video version of “Toy Story.”

Disney’s profit was $749 million, or $1.09 a share, in the quarter ended Dec. 31, up 51% from a year earlier. Revenue climbed 64% to $6.3 billion.

Also accounted for was Disney’s controversial severance agreement with former President Michael Ovitz, who received $39 million in cash and 3 million in stock options worth an additional $47 million, based on the close of trading on Tuesday. Disney didn’t break out the impact of Ovitz’s severance on its results, although company sources and analysts agree that it was about 3 cents a share.

“It was about equal to having one bad movie,” one company source said.

Disney’s stock closed at $72.625 in trading on the New York Stock Exchange, up $1 a share.