Disney Animated by Pixar Purchase

Disney and Pixar are finding Nemo a new home within the confines of the Magic Kingdom.

In a deal repairing any bridges once burned between the two studios, the Walt Disney Company agreed Tuesday to acquire Pixar Animation in an all-stock deal valued at $7.4 billion, expected to be completed this summer.

The purchase should boost Disney back to the top of the animation heap, an area in which the studio has struggled since the demise of hand-drawn animation.

The marriage between the two companies comes two years after Pixar and Disney decided to go their separate ways when discussions about extending Pixar's distribution contract soured.

"We've had a great run together--one of the most successful in Hollywood history--and it's a shame that Disney won't be participating in Pixar's future successes," Pixar CEO Steve Jobs said at the time.

Fast forward two years, and Jobs, who also heads up Apple Computer, is at the center of a deal that makes him Disney's largest individual shareholder, as well as a member of the Disney board.

The Disney-Pixar deal was made possible by Disney boss Robert Iger's strenuous efforts to mend the damaged relationship between the two studios, after taking over from Michael Eisner.

Shortly after Iger ascended to power, he cemented a deal that made several Disney-owned television series, including Lost and Desperate Housewives, available for download through iTunes Music Store, neatly coinciding with Jobs' release of the video iPod.

As it turns out, the peace-making move was only a sign of things to come.

Before the purchase, Pixar's contract with Disney had been scheduled to expire following the June 2006 release of Cars. The company was said to be mulling new distribution deals with the likes of Warner Bros. and 20th Century Fox.

But by walking away from the Mouse House, Jobs and Pixar executive vice president and creative force John Lasseter would have been forced to leave behind many of their studio's creations, such as the Toy Story characters and a certain clownfish of Finding Nemo fame.

Adding insult to injury, in November 2004, Disney announced its plans to go ahead with making a Pixar-less Toy Story 3 under its own Walt Disney Feature Animation shingle.

However, despite its bold statements about sequelizing Toy Story all by itself, Disney remained painfully aware that its CGI abilities lagged far behind those boasted by Pixar.

As a result, when Iger took over as Head Mouse, he listed boosting the studio's animation capabilities as his top priority.

Looks like he can check that one off his to-do list.

Under the terms of the purchase, Lasseter takes on the role of chief creative officer of the animation studios and principal creative adviser at Walt Disney Imagineering, which designs and builds the company's theme parks.

Pixar President Ed Catmull will serve as president of the new combined Pixar and Disney animation studios, reporting to Iger and Walt Disney Studios Chairman Dick Cook.

Over the past 12 years, the two studios have enjoyed an amazingly profitable run of box-office smash hits, with Toy Story, Toy Story 2, A Bug's Life, Monsters, Inc., Finding Nemo and The Incredibles totaling more than $3.2 billion in worldwide ticket sales, and billions more in ancillary revenue.

If the combined Pixar-Disney force can maintain a similar rate of success, Disney should be able to recoup its billions before too long.