On January 24, 2006, Disney announces that it will purchase animation studio Pixar for $7.4 billion dollars.

By the end of 2005, Pixar had become a giant in the world of movie animation, on the strength of its blockbuster hits Toy Story (1995), A Bug’s Life (1998), Monsters, Inc. (2001), Finding Nemo (2003) and The Incredibles (2004). Walt Disney Company had been their longtime distributor.

Since 1993, when Disney and Pixar signed their first three-picture deal, Pixar’s films had won 19 Academy Awards and grossed more than $3 billion at the box office. Their pioneering techniques in digital animation–Toy Story was the first animated film to be completely computer-generated–had set a new standard, blazing a trail that other companies had struggled to follow. In the same time period, Disney’s own animation unit had released more traditional animated films that were either modest successes, such as Lilo & Stich (2002), or flops, such as Home on the Range (2004). Its first completely computer-generated effort, Chicken Little (2005) was profitable, but had nowhere near the success of The Incredibles, which grossed $200 million domestically and won the Academy Award for Best Animated Feature Film.

Despite the success of the Pixar-Disney collaboration, Pixar CEO (and Apple co-founder) Steve Jobs had reportedly clashed with Disney’s longtime chairman and CEO, Michael Eisner, and in January 2004, Jobs announced that Pixar would begin talks with other distributors. Roy Disney, the nephew of Walt Disney subsequently led a shareholder revolt, and in the spring of 2004 Eisner received a 45 percent no-confidence vote from shareholders and was stripped of his chairmanship.

Eisner announced he would step down as CEO in September 2005, one year before his contract was set to expire. His replacement was the company’s president, Robert A. Iger. One of Iger’s first moves was to work on repairing the relationship with Pixar, whose latest contract with Disney was set to expire in June 2006, with the delivery of its next film, Cars.

Under the deal announced that January, and formally completed on May 5, Jobs would serve as a director on Disney’s board, while John Lasseter, a former Disney animator and the leading creative force behind Pixar’s films, would become chief operating officer of the animation studios, as well as the principle creative adviser at Walt Disney Imagineering. In a conscious effort by Pixar to maintain its unique creative process and non-traditional corporate culture, the two companies remained physically separate, with Pixar maintaining its headquarters in Emeryville, California (Disney is based in Burbank).