The Muppets will not be moving to Disneyland after all.
Jim Henson Productions and Walt Disney Co. on Thursday jointly announced that negotiations over a proposed $150-million sale of the Muppet characters to Disney had collapsed.
Both sides declined to elaborate. But sources close to the talks said tensions have gradually escalated since the deal was unveiled 18 months ago. Muppet creator Jim Henson was said to be distressed by Disney's insistence on owning the rights to the "Sesame Street" characters.
The fate of the deal became even cloudier after Henson died unexpectedly in May, since his contribution to future Muppet projects was a key point in the original agreement.
Sources said entertainment lawyer Barry Hirsch was hired to represent the Henson family in the Disney talks following Jim Henson's death. While Hirsch is one of Hollywood's top attorneys, his relations with Disney reportedly have been strained for several years.
The Henson heirs, in a prepared statement, said they looked forward to a "strong and productive future" despite the collapse of the deal that would have added the Muppets to the vast Disney family. "We would have liked to see this deal succeed," the Hensons said. "Unfortunately . . . the companies could not reach a mutually satisfactory agreement."
Michael D. Eisner, Disney's chairman and chief executive, wished Kermit the Frog and the rest of the Muppets, as well as the Hensons, "our best wishes in their endeavors."
While the announcement hardly represents a significant blow to Disney, entertainment analyst Paul C. Marsh of the Los Angeles brokerage Bateman Eichler, Hill Richards said the company would have profited from such characters as Kermit the Frog and Miss Piggy. "It's not something measurable," Marsh said. "But it certainly would have helped."
When the deal was announced, both companies said Disney would be the ideal place to carry on the Muppet legacy. Plans called for the studio that brought the world Mickey Mouse and Donald Duck to administer the Muppet film and television library and to produce new shows.
One attraction called "Here Come the Muppets" is already in operation at Walt Disney World in Florida. Sources said it probably would be preserved under a new contract.
The fate of the remaining Muppet characters remains in doubt, though several people speculated that another theme park operator such as MCA Inc. or Time Warner Inc. might make a play for the perennially available Miss Piggy and her cohorts.