In Turnabout, Disney Plans to Sell Arvida Subsidiary to JMB Realty for $400 Million

Walt Disney Co. said Thursday that it is selling the assets of its Arvida development subsidiary for about $400 million to an affiliate of JMB Realty, a giant Chicago-based real estate concern.

Disney said the sale was a “strategic business decision” that will enable it to focus entirely on its entertainment and theme park businesses. The sale, for short-term notes and assumption of certain liabilities, is scheduled to close May 30.

Arvida, which Disney acquired in 1984 as part of an anti-takeover strategy, is involved in the development of more than 20 planned communities in Florida, Georgia and California. It owns a minority stake in the posh Coto de Caza development in Orange County. Not included in the deal are the approximately 28,000 acres of land near Walt Disney World in Florida.

The purchase signals JMB’s entry into low-rise residential development, a spokesman said. JMB is privately owned.

Arvida earned $41.8 million in the fiscal year ended Sept. 30. Disney posted a profit of $247.3 million for 1986, up from $173.5 million the previous year.

Although the sale had been rumored for at least five weeks, two knowledgeable company sources had said last week that Disney was pressing ahead with a different plan, to sell the company to the public in the form of a master limited partnership. A third company source reiterated that view as recently as Wednesday.

The sources said at the time that negotiations with JMB did not extend beyond the recent sale of Arvida’s 50% stake in Town Center, a large shopping mall in Boca Raton, Fla., to a JMB affiliate.

One high-ranking Arvida executive said the sale may be due in part to personality clashes between Arvida Chairman Charles Cobb and two top Disney executives, Chairman Michael Eisner and Chief Financial Officer Gary Wilson.

According to that Arvida official, a sale of Arvida to JMB was actively considered a month ago, but halted after JMB officials deeply offended Arvida employees during a visit to survey the assets. The JMB visitors behaved “like bulls in a china shop,” he said, “and it got to the point where we were not going to give them any more information.” After that incident, the source said, he was assured by a top-ranking Disney executive less than two weeks ago that “JMB wasn’t a player anymore.”

Arvida, a Florida-based real estate company, was acquired 2 1/2 years ago for $214 million at a time when a previous Disney management was searching for acquisitions. Some critics objected that Disney was hastily trying to pile up debt to ward off unwanted suitors, but the acquisition was later praised by Eisner’s new management team.

Two weeks ago, Eisner told a Times reporter that Disney’s actions on Arvida would soon demonstrate the company’s commitment to the subsidiary and its management.

“It is possible that at the time we talked, the (master limited partnership) was the leading candidate,” Eisner said Thursday. That plan, Eisner said, would have been “very strongly geared toward keeping the management in place . . . allowing them to have a key role as an investor.”

The decision to sell instead to JMB “was made by our board, our executive committee and, finally, by me,” Eisner said. “I believe we have treated everybody fairly, particularly our own shareholders.” Although Disney has never divulged how much money it hoped to raise from the sale of units in a master limited partnership, one source said Thursday that the initial hopes of raising $450 million had been scaled down, hoping “to net $325 million.”

Eisner insisted that reports of a clash with Cobb are unfounded.

“We didn’t sell it because of some perceived conflict,” the Disney chairman said, adding that he expects Cobb to remain as a director and member of Disney’s executive committee. He said he hopes Cobb will work with Disney Development Co., a subsidiary primarily involved in developing theme park acreage. “We have every indication that he will,” Eisner said.

Cobb did not return a reporter’s call.