Mouse House finally lands Henson characters

This article was updated at 9:57 p.m.

Kermit and his Muppets pals are finally heading to the Magic Kingdom.

On Tuesday, a day after rejecting Comcast’s offer to acquire Disney, the Mouse House announced a long-sought deal to acquire the Jim Henson puppet characters and the lesser-known “Bear in the Big Blue House” property.

Discussed for more than a decade in one form or another, the deal’s coming together appears mostly coincidental to Mouse’s current corporate dilemma.

Still, the announcement is serendipitously timed for head Mouseketeer Michael Eisner, who can point to the deal as evidence of his ability to lead Disney down new and profitable paths.

Agreement also reps a coup for the children of the late Jim Henson, securing a high-profile future for the best-known of their father’s character creations while keeping an array of film entertainment assets for projects of their own making.

“It’s great for Disney, but it’s also a win for the family,” said one industryite with a history of dealings with the Henson company. “They basically have parked their father’s legacy in perpetuity at the place where it belongs, and they can kind of have their own lives as well.”

Hensons in action

Brian Henson and Lisa Henson, son and daughter of the company founder, have an array of film and TV projects in active development at the company, which is expected to focus more on entertainment for older demos than it has in the past.

Hollywood-based Jim Henson Co. also will continue to operate its Creature Shops in L.A. and London and will maintain and exploit rights to its other film and TV franchises such as “Fraggle Rock,” “Farscape” and “The Hoobs.”

Financial terms of the agreement with Disney weren’t released.

Disney will likely have to pay only part of the purchase price upfront — believed to be well under $100 million — and compensate the Hensons additionally by extending profit participation in the exploitation of the Muppets and other characters over the next several years.

Further limiting Disney’s out-of-pocket expense is the fact the deal involves only properties with a natural fit for its family-oriented theme parks and cable webs.

“They bought the assets that they care about, without the liabilities,” said one financial community observer.

Entertainment attorney Skip Brittenham helped fashion the agreement for the Henson family. Deal is expected to close within two months.

Agreement was announced after the close of market trading. But if Mouse shares rise on the news this morning, Team Eisner could find its defenses against the Comcast assault bolstered appreciably.

That’s because Comcast’s bid was entirely stock-based, so any escalation of Disney shares or decline of Comcast stock makes it harder for Comcast to argue the appeal of its offer.

Movement in the companies’ stock since the Comcast bid was announced already had most analysts predicting the cable company would have to sweeten its offer for Disney.

Previous deals

The Henson family paid $78 million cash in July to buy back their father’s company from the German media group EM.TV, which had acquired Henson three years earlier. Henson’s Sesame Street characters were sold off in 2001 to Sesame Workshop for $180 million.

In buying the Muppets, Disney is acquiring assets, and the film and TV library associated with characters such as Kermit, Miss Piggy, Fozzie Bear and Animal. Similarly, the Mouse is acquiring all assets related to live-action kids skein “Bear in the Big Blue House.”

“Since I worked with Jim Henson on the first Muppets TV special in the 1960s, it was obvious to me that his characters would make a deep imprint on the hearts of families worldwide, and this announcement is the culmination of a longtime desire to welcome them into the Walt Disney Co.,” Eisner said in a statement.

“Kermit and Miss Piggy are well known and beloved around the world, and will have an opportunity to be seen and loved by millions more well into the future through Disney’s distribution channels at home and abroad, including homevideo, family television programming and consumer products, in addition to the existing theme park presence at Walt Disney World and Disneyland,” Eisner continued.

“We are honored that the Henson family has agreed to pass on to us the stewardship of these cherished assets.”

Safe harbor

Henson co-chairman Lisa Henson called the agreement with Disney a culmination of her father’s vision for the Muppets franchise.

“The deal ensures that the Muppet characters will live, flourish and continue to delight audiences everywhere, forever,” she said.

“This new and very important relationship will enable our two companies to combine our respective talents and resources in ways that will fully realize the tremendous potential of the Muppet and Bear franchises,” Brian Henson said in a statement. “Michael Eisner’s long-standing passion and respect for the Muppets gives me and my family even more confidence in Disney as a partner.”

While Henson co-chairman’s reference to Eisner will no doubt be appreciated by the embattled Disney topper, terms of the company’s agreement with Disney would have to be honored by any future regime in the event of a Mouse takeover.

Long time coming

The Henson family said at the time of its buy-back from EM.TV that efforts already were under way to establish long-term rights exploitation deals with one or more studios. The deal with Disney — which accomplishes that aim in the most dramatic fashion — completes a negotiating dance with the Mouse first started by the late Jim Henson.

Just before Henson died in 1990, Disney was poised to buy the Henson company and fold it into the House of Mouse.

Though that deal was never concluded, Disney — along with Viacom, Time Warner and others — again figured in talks to acquire the company just before EM.TV stepped in to buy Henson for $680 million in February 2000 and again during an auction leading up to the Henson family’s repurchase.

“We think the Muppets are evergreen characters that have a broad family appeal,” said Peter Murphy, Disney’s chief strategic officer.

“We will look aggressively at developing new programming featuring both the Muppets in their classic presentation and perhaps in a new form that could include 3-D (computer-generated imaging). This could be in a TV movie, a TV series or a feature film.”

Lisa Henson noted the Henson company has already done some CGI tests on the Muppets Babies characters. Disney is aware of the tests but hasn’t yet seen the work, she said.

“There are a lot of cool possibilities, and bringing the Muppets into new technologies is one of the interesting new possibilities,” Henson said.

Intriguing prospect of a new CGI franchise is another well-timed development for Eisner, who was criticized when Pixar broke off negotiations to extend its animation studio’s co-production pact with the Mouse.

Past Muppet movies have used the puppet characters in mostly live-action settings. Recent theatrical titles have included “Muppets From Space” and “Elmo in Grouchland,” both released to modest success in 1999.

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