Marvel caught in the Disney web after $4bn takeover

Disney already has a tight hold on the tweenage girl market with hits such as Hannah Montana and High School Musical. Marvel gives it access to hard-to-reach young males who spend most of their time on the internet or playing video games, areas where Disney wants to grow.

The deal, which Iger called "a great opportunity at the right time", has the potential to yield billions of dollars for Disney by turning Marvel's library into movies, internet properties, video games, merchandise, television shows and comic books.

For its part, Marvel gains Disney's marketing and distribution muscle overseas, where the media firm has been focusing much of its efforts lately.

The deal also brings family history full circle for Iger.

When the Disney president and chief executive was a child, his great uncle Jerry would draw comics for him. In the 1930s Jerry had co-founded Eisner & Iger Studios, the comic book company that launched many famous cartoonists.

One of Jerry's early employees was Jack Kirby, a legendary figure in comic land and cocreator of some of the most famous comic book characters, including Captain America, Fantastic Four, the X-Men, and the Hulk. Now those characters will join Mickey in the House of Mouse.

Disney executives have blown hot and cold on Marvel for a decade. With the superheroes riding high at the box office in films made by rival studios, the deal-loving Iger decided it was time to swoop.

The Disney boss met Ike Perlmutter, Marvel's chief, in his Manhattan office in June. Perlmutter initially rebuffed the idea, believing Marvel would be better off going it alone. Given his record at the firm, it's not hard to see why.

He bought Marvel in 1996 when it had been teetering on the edge of collapse, having just emerged from bankruptcy. The Israeli-born investor was reportedly worried that his own firm, Toy Biz, would lose its contract to make Marvel merchandise if a rival bought it. He saw off the billionaires Ron Perelman and Carl Icahn to seal the deal.

Perlmutter was not into comics when running Toy Biz but he soon learnt to love the business. Thirteen years on, he and his partner Avi Arad have turned Marvel into a gold mine.

The comic firm has created blockbuster movie franchises partnering Sony Pictures on the Spider-Man movies and Fox, owned by Sunday Times parent News Corp, on the X-Men films. Marvel recently relaunched the career of Iron Man and has movies of The Avengers, Thor and other characters in the pipeline.

Although the Marvel characters are pulling in fans across the world and across generations, in today's financial climate, funding has become increasingly difficult for movies, even with Marvel's track record. The sale to cash-rich Disney removes that problem at a stroke.

Assured by Iger that he could stay at Marvel's helm, Perlmutter decided to take Disney's offer. It makes him a very rich man, pocketing $1.44 billion from the sale. This has not changed his attitude to publicity, however. There are no known pictures of him - he reportedly shows up at movie premieres in disguise - and he did not speak when the deal was announced.

How good is the deal for the House of Mouse? At $4 billion, it is going to have to sweat the superheroes to get a return for its money. The most famous aren't even available.

On the plus side, movie franchises now dominate ticket sales and Marvel has some of the biggest of them all. It has produced a Top 10 film almost every year this decade.

The three Spider-Man films have taken in $2.5 billion worldwide since 2002, according to the film researcher Box Office Mojo. A fourth is planned in 2011. Fox's X-Men Origins: Wolverine has pulled in $363m worldwide. Iron Man, released by Viacom's Paramount Pictures, generated $585m worldwide and was the second-biggest American release last year.

On the downside, there are some who wonder how much value Marvel has left in it for Disney when X-Men and Spider-Man are already tied up in licensing deals with rival film studios.

Citi analyst Jason Bazinet said: "We question the value of Marvel's lesser known characters ... This suggests future releases may be less successful."

Marvel's deals with Disney's rival studios are tight, and for the foreseeable future Disney will have to make do with a share of profits from the Spider-Man, X-Men and Iron Man movies. It will also have to share Marvel's heroes with Universal in its theme-park division.

Iger, however, is playing a long game. He aims to bring back his heroes as and when the rights come up. He also believes there are old and new heroes waiting for their turn in the spotlight. In an analyst's presentation he pointed to the success of Iron Man, a secondary comic character until Hollywood put him back on the map, as an example of what Marvel could still do.

Under Iger, who took charge in 2005, Disney has been on a buying spree. In 2006 the media giant paid $7.4 billion for Pixar, the animation house behind hits such as Finding Nemo, Toy Story and Monsters Inc. There was speculation at the time that Pixar would wither under Disney's shadow. This hasn't proved to be the case and Iger is at pains to stress that Marvel, too, will retain its autonomy.

"Marvel's brand and its treasure trove of content will now benefit from our extraordinary reach," he said. "We paid a price that reflects the value they have created and the value we can create as one company. It's a full price, but a fair price."

Disney and Marvel are getting together at a historic moment for media firms. The transition to digital media is redrawing the media landscape.

DVD sales, for long Hollywood's cash cow, increasingly look likely to join the CD in the knacker's yard. The death of DVDs would be bad news for Hollywood. Last year the boxoffice returns from leading studios were about $10 billion in America. By contrast, the home video market was worth $24 billion, according to Barclays Capital analyst Anthony DiClemente. Iger is betting that Marvel's powerful, global brands will help ease that transition.

"The DVD market is changing for reasons that go beyond just the current state of the global economy," he said. "What we have also said, though, is that people's interest in a high-quality product, particularly a product that makes sense for them to own because of its appeal to their kids, is something we think has given us an advantage."

Marvel's DVD sales, while "not immune to the changes that we are seeing", are on a more solid footing than non-branded, non-character driven movies, he said.

Thanks to mobile phones, iPods and computers playing movies, the consumption of media content has become ever more fractured, Iger said. "We believe high-quality branded content in a world where competition is growing, choice is growing, is something that is likely to have more attractive returns over time and is something we understand fully."

But analysts are cautioning that Disney has a lot to prove to make the Marvel deal work. Piper Jaffray said in a report that most of the synergies from the deal are not likely to materialise until 2011 and beyond, and that it expects Disney's "stock to likely drift slightly lower as near-term earnings estimates tick down".

Whether the gamble pays off or not, Mitch Cutler, manager of St Mark's Comics in Manhattan, believes Marvel is here to stay: "Captain America has been around for, what, 70 years? I'm sure there are times when he's more popular, times when he's less popular, but he's an icon and he'll still be there. As will Spider-Man, Iron Man and the rest ... Things go in and out of fashion but at the core there is some 'truth', for lack of a better word, about these characters that keeps them popular, regardless of who is the boss."

• With Time Warner sitting on $7 billion in cash, the Marvel deal has ignited rumours of a second wave of consolidation in the media industry. Dream Works Animation, home of Shrek, is seen as a potential takeover candidate, as is MGM with its huge library of classic films. The games firms Electronic Arts and Take Two Interactive, with its Grand Theft Auto franchise, are also being touted as potential buys.

Business heroes who swooped to save Marvel

The mysterious stranger pulling the strings behind Marvel's stable of superheroes is Isaac "Ike" Perlmutter.

The Israeli immigrant, a veteran of the 1967 Six Day War, shuns publicity and has never given a press interview while running Marvel. So far he has even managed to evade the photographers.

He didn't speak at last week's press announcement of Disney's $4 billion (£2.4 billion) offer for his firm. His statement read: "Disney is the perfect home for Marvel's fantastic library of characters. This is an unparalleled opportunity for Marvel to build on its vibrant brand and character properties by accessing Disney's tremendous global organisation and infrastructure."

Perlmutter's absence should have come as little surprise. He shuns attention, and reportedly attended the premiere of Iron Man disguised in glasses and a moustache.

He made his fortune in "dollar store" outlets selling surplus goods and from buying collapsed companies. He once owned a controlling interest in Victor Kiam's Remington Products.

His involvement in Marvel began in the early 1990s through his ownership of Toy Biz, a company that marketed action figures and other toys. Toy Biz and Marvel struck a semi-merger agreement and a deal on licensing fees.

However, the deal's future looked uncertain after an expensive expansion and complex financial manoeuvres went wrong. Marvel, then controlled by billionaire Ron Perelman, filed for Chapter 11 bankruptcy protection in 1996, dragged down by debts of $600m.

Perlmutter - with the help of Toy Biz co-owner Avi Arad - decided to take control of the firm. The fight for control landed Perlmutter and rival suitor billionaire investor Carl Icahn in court. Icahn briefly controlled the firm but eventually Perlmutter emerged the victor, having seen off two of the world's most fearsome corporate raiders.

Arad made his fortune designing toys and is a motorbike-loving extrovert. He makes a classic "odd couple" pairing with the limelight-loathing Perlmutter. The two have gone on to reinvigorate Marvel's fortunes, cutting lucrative deals for Hollywood blockbusters, including Spider-Man, The X-Men and Iron Man. Marvel has produced a top 10 movie almost every year for the past 10 years.

Perlmutter reportedly had little interest in the comics business initially but is now a big fan. The Disney deal was sealed after Disney boss Bob Iger agreed to let him continue running Marvel after the completion of the sale.

He certainly doesn't need the money. The $4 billion sale lands Perlmutter a $1.4 billion payday - enough cash to cover the cost of disguises for the rest of his life.