Top Deals of the week

Ebay to sell Skype

Internet auction house EBay Inc plans to sell a majority stake of 65% in its online phone unit Skype for $1.9 billion to private investors including Silver Lake, Netscape co-founder Marc Andreessen venture firm, London based Index Ventures, etc.

Valuation

The deal valued Skype
at $2.75 billion but it was below the $3.1 billion eBay spent in acquiring Skype. Shares in eBay fell more than 2 percent after the news.

Why is eBay selling?

• EBay want to focus on its auction service and its electronic payment service (PayPal). EBay's chief executive, John Donahoe, has stated that,"Skype is a strong stand-alone business, but it does not have synergies with our e-commerce and online payments business."
  
• Skype's core business is to offer free Internet phone calls between two PCs or from PC to handset and it has a subscriber base approaching half a billion users. But, most of the calls are free and doesn't generate profit for the company. (This has been seen as a cause of worry for the new buyers too. They need to figure out how they can convert the huge subscriber base in revenues by using avenues such as Internet advertising.)
  
• The buyout of Skype by eBay had puzzled the investors when it was bought in 2005 as both the companies had a different profile.
  
• It plans an IPO for PayPal in 2010 and wants to limit its risk by bringing in other investors.
  

Walt Disney to buy Marvel Entertainment

Marvel Entertainment is the parent company of Marvel Comics which is the owner of famous characters like Spiderman, X-men, Fantastic four, Captain America.

Valuation

The deal is valued at $4billion. Marvel shareholders will get $30 per share in cash plus 0.745 Disney shares for every Marvel share owned.Marvel shares rose 25% and Walt Disney shares fell 3% in the trading on 31-Aug after the news.

(Generally, the shares of the firm acquiring falls and the firm being acquired raises after the deal announcement. This is because of the perceived burden the finances of the acquiring firm will take because of the acquisition.)

The Synergy

(As Marvel is the owner of characters like Spiderman and X-men and Disney of Donald Duck and Mickey Mouse, I came across this funny site which list mash ups of the characters owned by both of them. Check it out.)

For Walt Disney's channel

• Marvel mainly has superhero like characters that have large young male following and Disney which is perceived to have more female following will win over the young male audience by its current acquisition. It will try to attract boy focused advertising of video games and action toys on its channel. Disney has recently branded its Toon Disney channel as Disney XD to make it more attractive to boys.
  
• Disney XD's main rival is Time Warner's Cartoon Network whose audience is more than 70% of boys and Viacom's Nickelodeon.
  

For Walt Disney Company

• Disney will increases it exposure in the DVD market but the DVD market is on decline
  
• Disney will look forward to using Marvel characters in its theme parks but Marvel already has a tie up with other theme parks like Universal studios, merchandisers and movie studios which will take some time to unwind. Like, Paramount Pictures has the right to distribute the next five Marvel superhero films.
  
• Disney will also gain from the merchandising rights of Marvel characters like Spider Man and Iron man.
  
• There are worries that Disney acquisition may affect the creativity freedom of Marvel as Disney has done in its previous acquisitions.