Mickey Mouse, meet the X-Men.

The Walt Disney Co. (DIS) said Monday it agreed to buy Marvel Entertainment Inc. (MVL), the creator of Spider-Man, the X-Men and thousands of other characters, for about $4 billion in the company's largest acquisition since it bought Pixar Animation Studios in 2006.

The deal opens a new chapter in Disney's long history, adding a slew of new, globally recognized movie characters - such as Iron Man, Spider-Man, X-Men, Captain America, Fantastic Four and Thor - to its deep bench of classic and contemporary icons. It also adds countless lesser-known storylines and characters that Disney hopes to introduce to the world.

The deal marks the first big media deal since companies began hoarding cash last fall during the global financial crisis. Aside from the economic downturn, Disney's move amounts to a rare display of confidence in an industry that's muddling though a daunting transition to digital media amid growing doubts about its traditional business models.

Disney Chief Executive Robert Iger said during a conference call Monday that Marvel was an attractive target for Disney despite the challenges facing the media industry, such as the decline of DVD sales, that has hurt profitability at major film studios.

"They're not bulletproof. They are not immune from the changes that we're seeing, but they have established a footing that we think is more solid than what you typically see in the nonbranded non-character driven movie," said Iger.

Disney shares were down 3.9% at $25.80 while Marvel shares jumped 25% to $48.32. Shares of DreamWorks Animation SKG Inc. (DWA) were up 5% to $33.25 on the prospect of more acquisitions in media and entertainment.

"This is another sign that confidence is returning to the marketplace," said Miller Tabak analyst David Joyce.

The Disney-Marvel marriage fits with the strategy du jour for major media conglomerates such as Disney and Time Warner Inc. (TWX) of driving revenue from popular content over time across the globe and multiple technology and entertainment platforms.

Disney has a unique array of businesses to execute the strategy with its global sales and distribution infrastructure, its theme parks, its video game and merchandising businesses and its cable and broadcast TV networks. For its part, Marvel is a particularly attractive target for the company given its appeal to younger male audiences, while Disney has shown outsized strength with females through properties like Hannah Montana and the Jonas Brothers.

 
   High Price For Premium Assets

Under the agreement, Marvel shareholders will receive $30 a share in cash plus about 0.745 Disney share for each Marvel share. Based on Friday's closing prices, the deal is valued at $50 per Marvel share, about a 29% premium.

Miller Tabak's Joyce noted that Disney is paying a steep valuation for Marvel, but he views the deal as a "good long-term strategic move" for the company.

"You can't expect to pay a bargain price for premium assets," said Disney Chief Financial Officer Tom Staggs. "Marvel is worth more inside Disney than outside Disney."

During the conference call following the announcement, Staggs said the company will issue roughly 59 million Disney shares in order to consummate the deal, but the company plans to repurchase the same number of shares over the next year to avoid long-term dilution to its existing shareholders.

Staggs said he expects the deal to be dilutive to Disney shareholders in its fiscal 2010 by a a mid-single-digit percentage, but he expects it to be accretive to shareholders within two years.

The companies said the amount of cash and stock in the deal will be adjusted at closing so that the value of the Disney stock is at least 40% of the purchase price. Besides shareholder backing, the deal will require antitrust approval.

Moody's Investors Service affirmed its rating on Disney's debt despite the high cost of the deal, but said that its willingness to spend on acquisitions despite the uncertain economic outlook is inconsistent with the actions of its peers. The credit rating agency said that Disney is a weak A2-rated credit, but noted that the strategic benefit of the Marvel purchase and the ability to generate free-case flow should help improve the company's debt profile.

Marvel has long-term production and distribution deals in place with Disney competitors, including Sony Corp.'s (SNE) Sony Entertainment, News Corp.'s (NWSA) 20th Century Fox Films and Viacom Inc.'s (VIA) Paramount Pictures, which complicate the company's strategic position.

News Corp., which is parent of Dow Jones & Co., publisher of this news service, declined to comment. Viacom and Sony weren't immediately available to comment.

In many cases, it will take years before Disney can garner anything more than licensing fees from some key Marvel characters, but Staggs said those revenue are attractive and the company will have the option of ending those deals over time and integrating them into Disney.

Marvel Chief Executive Ike Perlmutter will continue to oversee the Marvel properties, which have branched out into animated television series and live-action films. Marvel earned a net profit of $206 million last fiscal year, up 47 percent from a year earlier, on revenue of $676 million.

-By Nat Worden, Dow Jones Newswires; 212-416-2472; nat.worden@dowjones.com

(Mike Barris contributed to this report.)