DISNEY, CAP CITIES/ABC TO MERGE

NEW YORK -- Walt Disney Co. and Capital Cities/ABC have agreed to merge in a deal valued at about $19 billion.

merger ever and the second-biggest takeover in the history of U.S. business, topped only by the $25 billion acquisition of RJR Nabisco by Kohlberg Kravis Roberts & Co. in 1989.

Under the terms of the agreement, which has been approved by the boards of each company, Cap Cities/ABC shareholders will have the right to receive one share of Disney common stock and $65 in cash for each of their shares.

In a joint statement, Michael D. Eisner, chairman and chief executive officer of Disney, and Thomas S. Murphy, Cap Cities/ ABC chairman and CEO, said: "The combined company will become a vital and dynamic force in the entertainment and media business, reaching family audiences worldwide and providing them with unparalleled news, information and entertainment both inside and outside the home.

"Disney and Cap Cities/ABC have created some of the most recognized and respected brands in the world," the two said in the statement. "The merger will create tremendous value for the shareholders of each company by taking full advantage of the complementary strengths of each organization."

Once the merger goes through, Cap Cities/ABC will become a wholly owned subsidiary of Disney. The combined enterprise, which will retain the Walt Disney Co. name, will be led by Eisner, who will continue as chairman and CEO. Murphy will relinquish his current titles on the effective date of the merger and join Disney's board. Robert A. Iger will continue as president and chief operating officer of Cap Cities/ABC.

The companies had combined annual revenues in 1994 of approximately $16.5 billion.

The transaction, which is subject to regulatory review and approval of the shareholders of each company, is expected to be completed by early 1996. The companies noted that because their businesses are complementary, they do not expect staff reductions to result.

"This transaction is a once-in-a-lifetime opportunity to create an outstanding entertainment and media company," Eisner said. "The merger positions us for substantial growth worldwide and puts us in a strong competitive position in an industry which, by this transaction, we are helping to define. "