DISNEY'S INTERNAL WAR WIDENS EISNER'S CRITICS USE COMCAST BID AS AMMUNITION.

Byline: Greg Hernandez Staff Writer

BURBANK - With Comcast Corp. in no hurry to sweeten its takeover bid for The Walt Disney Co., the bitter corporate feud between Chairman and Chief Executive Officer Michael D. Eisner and dissident shareholder Roy E. Disney escalated Tuesday in dueling sharply worded letters to shareholders.

Roy Disney and fellow former board member Stanley Gold, who both resigned as directors last year, told shareholders Comcast's unsolicited bid is evidence that the company is not being managed properly. They urged investors to vote against re-electing Eisner and three other members to the company board at the March 3 annual shareholders meeting.

``We have heard promise after promise, projection after projection, year after year, from Mr. Eisner and his team,'' they stated. ``Our patience has worn out.''

In response, Disney's board said Roy Disney and Gold ``persist in waging their distractive propaganda campaign'' against the company and its board.

Late Monday, Disney's board unanimously voted to reject the proposal by Philadelphia-based Comcast, the nation's biggest cable operator, to buy Disney for what originally was $54 billion in stock and assumption of $11.9 billion of Disney debt.

A Disney-Comcast merger would produce the world's largest media company with revenues of $46 billion in 2003, enough to move past Time Warner's $40 billion.

But with the value of Comcast stock falling and Disney's surging, the bid was immediately viewed as far too low. The board said it remained open to future offers from Comcast and others at the right price.

Comcast, which has maintained that its offer is ``a sound and compelling proposition,'' did not make any official statements Tuesday. But sources close to the company told Reuters news service that it would not be raising its bid. Still, analysts said until Comcast officially withdraws its offer, anything could happen.

``If they are as interested as they indicate they are, maybe it's not dead,'' said media analyst David Mantell of Loop Capital Markets in Chicago. ``They sure made it seem like this was something that they really wanted to go forward with and it appears that they carefully prepared for this.''

But media analyst Robert Routh of Natexis Bleichroader Inc. said the Comcast bid has clearly lost steam.

Comcast Chief Executive Officer Brian L. Roberts ``could make a more attractive offer to Disney shareholders but at the same time it becomes less attractive to current Comcast shareholders,'' Routh said. ``The question is, will Comcast come in and do something? Also, Disney could choose, realizing it's takeover bait, to make an acquisition as a pre-emptive strike to make itself less digestible.

``When you are under the gun like Eisner and the board, you either succumb or you go on the offensive,'' he added. ``Right now, they are on the defensive.''

Roy Disney and Gold said ``strategic failures'' such as the breakdown in talks with Pixar Animation Studios, which created ``Toy Story,'' ``Finding Nemo'' and other major hits, made Disney an attractive target for takeover. They note that despite gains in 2003, Disney's operating income of $3.2 billion is below the $3.5 billion achieved in 1996.

The efforts of Roy Disney and Gold received a boost last week when independent corporate governance analyst Institutional Shareholder Services recommended that shareholders vote against re-electing Eisner to the board.

The Disney board has responded by telling shareholders that Roy Disney and Gold are putting their interests ahead of the company.

``You have every reason to question the actions of Stanley and Roy,'' the board stated. ``You have every right to wonder how the best interests of all shareholders are served by their distractive efforts, particularly at a time when you should want your board and management devoting their energy and resources to forwarding the company's momentum.''

Regardless of how things play out in the boardroom, analyst Mantell said the showdown between Roy Disney and Eisner is an unfortunate distraction at a time when the company needs to be circling its wagons.

``It's never pleasant when you have to deal with matters that are extraneous to running the business,'' he said.

Greg Hernandez, [phone]

greg.hernandez(at)dailynews.com