LOS ANGELES (Reuters) – Walt Disney Co’s $4 billion deal to buy George Lucas’s Lucasfilm Ltd, Disney’s third major entertainment acquisition in seven years, started taking shape in May 2011, when the “Star Wars” creator had to show Disney CEO Bob Iger how to use a lightsaber.
Lucas and Iger were at Disney’s Hollywood Studios theme park in Orlando, Florida, brandishing the toys at the grand opening of a 3-D version of the park’s Star Tours ride, Iger recalls, and “George had to show me how to use it.”
Talks heated up this summer when the 68-year-old Lucas recently decided he wanted to retire from running a business to focus on smaller, more personal film projects. Iger was excited about the prospect of adding marquee properties like Star Wars and Indiana Jones to the stable of brand names he’s now spent $15 billion to acquire since becoming CEO in 2005.
“We proved with our Pixar and Marvel acquisitions that we know how to expand the value of a brand,” Iger said in an interview. “And brands don’t get much bigger than Star Wars.”
Lucas is expected to serve as a consultant while Disney revs the producer’s entertainment company, which generated $550 million in operating earnings in 2005 when Lucasfilms made the last installment of his franchise, “Star Wars: Revenge of the Sith”.
Lucas, in a video interview released at StarWars.com, said: “I really wanted to put the company somewhere in a larger entity which could protect it. Disney is a huge corporation. They have all kinds of capabilities and facilities, so that there’s a lot of strength that is gained by this.”
‘NOT HEARING ANY FOOTSTEPS’
Kathleen Kennedy, co-chairman of Lucasfilm, is expected to play a major role in the Star Wars franchise, and Lucasfilm said it would retain operations in Northern California.
Disney intends to make a new Star Wars film every two or three years, Iger said. The company will also use the iconic brand to build theme park rides, produce TV shows and sell Darth Vader action figures.
“This is remarkably attractive for Disney,” said Matthew Harrigan, an analyst with Wunderlich Securities. “I almost feel like Lucas really wanted it to be with Walt Disney and almost gave them a sweetheart deal.”
Iger’s big ticket acquisitions haven’t always gotten such rave reviews. When Disney bought Steve Jobs’ Pixar animation studio for $7.5 billion in stock in 2006, some analysts said at the time that the company overpaid for the producer of “Toy Story” and “Finding Nemo”.
Disney has since bought back the stock it issued for that deal, as it did after spending $4.2 billion in stock and cash to buy comic book and action film maker Marvel in 2010, said Disney Chief Financial Officer Jay Rasulo.
Both of those transactions have paid dividends: Marvel produced “The Avengers” earlier this year, which had worldwide ticket sales of $1.5 billion.
Pixar produced two “Cars” movies, which sold $1 billion in tickets worldwide, and helped Disney design the Cars Land section of its California Adventure theme park in Anaheim.
“I think we made believers of those who supported us back then,” said Iger, “and maybe turned some of our critics into believers.”
When Disney produces the first of the new “Star Wars” movies in 2015, “Star Wars” and a film based on a Marvel character will account for as much as half the studio’s action film slate, Iger said in a conference call. Pixar, with its almost-unblemished record of success at the box office, will continue to make another film each year.
“I’m not looking over my shoulder with any of those acquisitions,” said Iger. “In football, there’s a term for when a receiver catches the ball and gets hit. It’s called ‘hearing footsteps’.”
With the Lucasfilms deal, the Disney executive said: “I’m not hearing any footsteps.”
(Additional reporting By Liana Baker in New York- Editing by Jonathan Weber and Edmund Klamann)