The maiden first broke surface on a warm, L.A. kind-of-spring day back in 1977. Producer Brian Grazer, then all of 25, was tooling along the Pacific Coast Highway, reflecting on his abysmal record with the ladies. "They all had so many prerequisites," he remembers thinking. "You had to have a Porsche or a Ferrari. You had to have all these things, and I got kind of discouraged. So I'm driving along and I think, 'I have to meet somebody real pure, somebody from a whole other world. Like a mermaid.' "

Seven years later, Grazer's freeway reverie about a man who goes overboard—Splash—for a mermaid is the year's runaway box-office hit. Directed by Ron Howard and featuring Daryl Hannah, everyone's catch of the day, Splash is sweeping up audiences and carrying along with it a take of $24 million in just 17 days.

What's more, the ripple effect of Splash has been to pour new life into Walt Disney Productions, ancestral home of Mickey Mouse, Donald Duck, Pluto, Tinker Bell and a host of other cartoon hall-of-famers. The happy result has been a 26 percent increase in the price of Disney stock (from $50.50 to more than $63 recently). Less happily, the success of the picture has inspired rumors of corporate takeover and has aggravated internecine conflict in the Disney family.

The company's unwelcome suitors are rumored to include Coca-Cola, RCA and the expansion-minded Rupert Murdoch. The international publishing czar is ambitious to get into the movie business, having recently emerged with a $40 million profit from an unsuccessful attempt to gain control of Warner Communications. The Disney empire's defenses against corporate raiders seem weakened. Roy E. Disney, 53, the famed animator's nephew and son of the company's co-founder, abruptly resigned from the board of directors on March 9—the very day Splash opened to boffo reviews. The largest single stockholder in the company (close to 2.7 percent), Disney bought up an additional 50,000 shares at the end of February, leading some analysts to speculate that he also had takeover in mind. In exiting, Roy cited "personal reasons," but he is known to have had differences with company president Ronald Miller, 50, a onetime tight end for the Los Angeles Rams who joined the Disney studios three years after marrying Walt's daughter Diane in 1954. (The couple, who have seven children, separated last year.)

Since Walt's death in 1966, Disney productions has failed to match such glory-day classics as Snow White and the Seven Dwarfs, Pinocchio and Fantasia. Instead the studio churned out a string of puerile and unimaginative movies with titles such as Herbie Goes to Monte Carlo and Unidentified Flying Oddball. Dud flicks and the $28.3 million start-up cost of the Disney cable channel sent movie division revenues plummeting by 18 percent last year. As Disney's once proud movie tradition faltered, the company became ever more dependent on Disneyland and the other theme parks, which account for $1 billion in annual revenues.

Then came Splash. Grazer's mermaid fantasy had languished for years at several studios when in 1982 Disney executives read and loved the script. The puritanical Walt Disney (left), who would not allow Mickey and Minnie Mouse to have kids, would have been shocked by Splash's nudity and bawdy humor, but Grazer was uncompromising. "I made it a real strong point that I didn't want a Disney picture," he recalls. "Mermaids don't wear bikini tops." Miller, frustrated by being unable to bid for scripts like Kramer vs. Kramer and Raiders of the Lost Ark because of the Disney image, responded by handing over Splash to Touchstone, a new division that was set up expressly to un-Disney Disney productions.

The traditional family product has by no means been abandoned—Oz, a story of Dorothy's later adventures, went into production in February in England—but Miller's Disney, if not Disney's Disney, is determined to bring in young adult audiences. Splash has given the company its biggest commercial hit since Mary Poppins, and no one at the studio will soon forget this mermaid that didn't get away.