STORMING THE MAGIC KINGDOM Wall Street, the Raiders, And the Battle for Disney By John Taylor Knopf. 261 pp. $18.95
THE ARREST of investment banker Dennis Levine a year ago on charges of illegal insider trading opened a new, agonizing chapter in Wall Street history, exposing a pattern of corruption among some of Wall Street's most prominent traders, investment bankers and speculators. The ensuing scandal marked a turning point in the literature of Wall Street, as well.
That is bad luck for John Taylor, whose reporting of the 1984 battle for control of Walt Disney Productions appears to have been essentially completed before Levine began telling his story to prosecutors. In Storming the Magic Kingdom, Taylor dissects the Disney takeover attempt, offering it as an example of the billion-dollar corporate power plays that have shaken up the ownership and direction of some of the largest American businesses.
It is a good choice. Disney, after all, is no run-of-the-mill company. For half a century, the Disney name spelled magic to millions of children. But by the time of Disney's death in 1966, much of the magic had worn off. The company had passed into the hands of some of Disney's old cronies and his overmatched son-in-law, Ronald Miller, who steadily lost touch with the moving currents of American entertainment. When the first stirrings of the takeover battle began in January 1984, Taylor says, the Disney studio had not produced a live-action hit since The Love Bug in 1969.
Disney's stock was languishing at less than $60 a share in November 1983. At that stock price, a raider could acquire the entire company for a little over $2 billion. But the pieces of the Disney empire were worth far more than that if sold separately. The Disney theme parks alone could bring $2 billion, experts estimated. The Disney film library of 25 animated classics -- Bambi, Pinocchio, Snow White and the rest -- plus hundreds of live-action films, cartoons and television programs were worth anywhere from $250 million to $1 billion. And that still left the extensive Disney real estate holdings. Disney was a bargain.
Taylor argues that once that bargain became recognized on Wall Street, a takeover attempt was inevitable. He presents close-up portraits of the participants in the struggle for control of Disney and shows how their interlocking membership in an elite fraternity of deal makers provided irresistible momentum for the takeover bid. But as a case study of the takeover phenomenon, his Disney story is incomplete. As prosecutors have followed up on the confessions of Levine and his ally, speculator Ivan Boesky, they have begun to find evidence not just of individual law-breaking but also of institutional corruption that probably tainted entire takeover campaigns. Not until that story is complete can a definitive book on takeovers be written. Taylor is on the wrong side of that line of demarcation.
FOR THOSE unfamiliar with the combination of ego and economics that drive takeovers, the Disney story is a good primer, however. The company's bargain price rapidly attracted an expanding group of raiders and potential buyers that included Walt Disney's estranged nephew Roy E. Disney, corporate raiders Saul Steinberg and Irwin Jacobs, Boesky and other similarly well-heeled high-rollers. On June 8, 1984 -- the day before Donald Duck's 50th birthday -- Steinberg announced he would attempt a hostile takeover of Walt Disney Productions. If successful, he planned to keep Disneyland and Walt Disney World and sell the rest to investors.
The story of Disney's costly defense and the coup that brought in new leadership and saved the company is well told by Taylor, formerly a senior writer at Manhattan, inc. magazine. He employs the fly-on-the wall narrative that is now standard for such business tales, recreating the flow of conversations, telephone calls, arguments, conferences and scheming by which the takeover fight progressed.
An investment of faith by the reader is required for this approach, since the conversations flow without attribution. Taylor obviously won the confidence of some combatants in this drama, perhaps including Disney chairman Ray Watson, whose comings and goings appear in minute detail. There is evidence, too, of extensive back-checking with other players and sources. That effort, however, must have contributed to the delay that brings Taylor's book into print 2 1/2 years after the events in the book took place. Storming the Magic Kingdom arrives on the scene just as the shocks of the insider-trading scandal are blowing huge chunks of protective hide off Wall Street's body, exposing a network of crooked connections beneath the surface.
As their guilty pleas document, Levine, Boesky and their accomplices shared advance information on dozens of mergers and takeovers in the 1980s, enabling them to make at least $100 million in illegal profits. Based on public information, the Disney takeover attempt was not one of these deals. But Boesky played a part. So did Michael Milken, head of the Beverly Hills office of the investment banking firm Drexel Burnham Lambert and the master fund-raiser for hostile takeovers. Milken and Drexel Burnham Lambert have been served with subpoenas in the Boesky investigation. No charges have been placed against either Milken or the firm.
Perhaps Disney was one of those deals that simply proceeded in the thick atmosphere of ostensibly legal tips and rumors that permeates Wall Street. One such rumor was picked up by author Taylor, who describes a lunch Steinberg had with an unnamed investment banker in February 1984. The banker urged Steinberg to take a close look at Disney. "Something was going to happen there," the source said. Acting on the tip, Steinberg sent his analysts poring over Disney's financial statements.
At that moment, Roy Disney was meeting secretly with advisers to consider a possible challenge to Disney's management. Two weeks after Steinberg's lunch, Roy Disney stunned the company by publicly announcing his resignation from the Disney board -- tipping off Wall Street that a battle for control of the company could be in the offing. Thanks to a head start, Steinberg was ready to pounce when that word broke, Taylor reports, and accumulated a large block of Disney stock at a favorable price. The identity of the tipster and the source of the information are an intriguing, undeveloped question. It is the kind of question that will be answered in the next generation of Wall Street books. :: Peter Behr, editor of the National Weekly edition of The Washington Post, is the co-author of "The Leading Edge: CEOs Who Turned Their Companies Around: What They Did and How They Did It."