LOS ANGELES – The Walt Disney Co. (DIS) said Tuesday it is buying longtime partner Pixar Animation Studios Inc. (PIXR) for $7.4 billion in a deal that could restore Disney's animation domination while vaulting Pixar CEO Steve Jobs into a powerful role at the media conglomerate.
Disney will buy Pixar in an all-stock transaction that makes Jobs Disney's largest shareholder. Jobs will also join Disney's board.
Pixar President Ed Catmull will serve as president of the new combined Pixar and Disney animation studios, reporting to Disney chief executive Robert Iger and Dick Cook, chairman of The Walt Disney Studios.
Pixar Executive Vice President John Lasseter will be become Chief Creative Officer of the animation studios and Principal Creative Adviser at Walt Disney Imagineering, which designs and builds the company's theme parks.
"With this transaction, we welcome and embrace Pixar's unique culture, which for two decades, has fostered some of the most innovative and successful films in history," Iger said in a statement.
"Disney and Pixar can now collaborate without the barriers that come from two different companies with two different sets of shareholders," Jobs said in a statement. "Now, everyone can focus on what is most important, creating innovative stories, characters and films that delight millions of people around the world."
Through Jobs, Disney will tightens its link with Apple Computer (AAPL), the innovative technology company behind music and video iPods that Jobs co-founded and also leads as CEO.
Disney is not acquiring a direct interest in Apple. But Jobs could help Iger push his plans to marry films, TV shows, video games and other content to computers, iPods, handheld game consoles and even cell phones.
The deal will accelerate Iger's plans to strengthen Disney's animated features, the hallmark of the company since its founding and a steady source of characters for Disney's theme parks and other units.
Pixar has served as Disney's de facto animation unit for a decade. Two Pixar movies, "Finding Nemo" and "The Incredibles," have won Academy Awards for best animated feature film.
Pixar films have been a financial windfall for Disney, which receives 60 percent of the profits as part of a distribution deal that had been set to expire after the release of "Cars" this summer.
By contrast, Disney's own animation unit has struggled, producing some modest successes, such as 2002's "Lilo & Stitch," and many flops, including "Treasure Planet" and "Home on the Range."
Its first fully computer-animated effort, "Chicken Little," grossed more than $100 million domestically since its release last year and will likely be profitable. But that figure falls well short of the more than $200 million domestic gross of 2004's "The Incredibles."
Disney and Pixar had been discussing an extension of their distribution deal since early 2003. Last year, analysts said striking that agreement was Iger's top priority.
The talks stalled in 2004 after Pixar demanded that it own 100 percent of all future films and pay Disney a straight distribution fee, similar to the deal "Star Wars" creator George Lucas had with Twentieth Century Fox.
Pixar also wanted ownership of all the films already produced as well as two that were remaining under the existing agreement at the time.
Personal animosity between Jobs and former Disney CEO Michael Eisner also contributed to the breakdown.
In 2004, Jobs broke off talks with Disney and said he would begin talking to other studios, including Fox and Warner Bros. Relations soured even more after Disney announced it would make the sequel "Toy Story 3," a project strongly opposed by Pixar.
The relationship between the two companies goes back to 1991, when Disney agreed to finance and distribute three films from the fledgling company.
That deal led to the release of "Toy Story" in 1995 -- the world's first fully computer animated feature film. It was a huge hit and became the highest-grossing film that year.
The same year, Pixar raised $140 million in an initial public offering.