Could Apple Buy Disney? Wall Street Revives Rumor of Mega-Deal

Tim Cook Apple
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Apple could potentially find the cash to pull off a $200 billion-plus takeover of Disney — creating a company worth $1 trillion with “almost limitless opportunities in content and technology.”

That’s according to a speculative analysis from RBC Capital Markets, which in a note to client Thursday said such a colossal tie-up would be contingent on Apple getting tax breaks to “repatriate” overseas cash.

“Recently, investors have increased their expectations that Apple could seriously consider acquiring Disney,” RBC analysts Steven Cahall and Leo Kulp wrote in the note.

A combined Apple-Disney would create an instant competitor to Netflix that would take advantage of the Mouse House’s content and Apple’s user base, the anlaysts speculated. Other benefits: integrating Apple consumer tech as experiences in Disney’s theme parks; and landing global streaming sports rights for ESPN via the combo of Disney-backed BAMTech and Apple distribution and a strong balance sheet.

“Content is a major focus for Apple, target size is not an issue, and Disney offers an avenue to diversify away from hardware without diluting the strong Apple brand,” RBC’s Cahall and Kulp wrote.

The M&A rumor mill got new grist last fall, when Apple chief Tim Cook (pictured above) told analysts that the tech giant was “open to acquisitions of any size.” In addition, Apple execs met with Time Warner honchos in late 2015 in a discussion that raised the possibility of a merger — before AT&T moved on its $85 billion bid for Time Warner.

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Rumor Patrol: Would Disney Acquiring Netflix Even Make Sense?

The Apple-Disney M&A chatter comes as analysts in the last few months have debated the possibility that Disney would make a move to buy Netflix — a highly leveraged transaction that some view as needlessly risky.

But would Apple shareholders support such a bet-the-company move? Assuming a 40% premium for Disney, the deal would carry a hefty $237 billion price tag. If Apple investors balk, Disney could consider spinning off assets like ESPN and theme parks to make the deal more palatable.

Another caveat: Apple would need U.S. regulators to give it a “tax holiday” to repatriate offshore cash to fund an acquisition of Disney. Assuming Apple could obtain a 9% tax rate, it would effectively have access to cash of $223 billion, RBC noted. “Even though investors might expect higher cash returns in form of buybacks/dividends, strategic uses are likely to take precedence,” the analysts wrote.

Per RBC, the merger of Apple and Disney would be highly accretive to earnings, to the tune of 15%-20% increase in earnings per share based on the presumed 40% premium deal price and Disney’s low debt load.

“We like Disney’s fundamentals. Assuming Apple sees the same thing and has the cash, investor anticipation of a prospective transaction only adds conviction to the momentum we see in Disney’s shares,” Cahall and Kulp wrote.

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  1. More like Verizon gobbling up Disney-ABC, or ABC & ESPN only.

  2. Eric says:

    So far, AT&T and Time Warner merger is still pending. It’s been 6 years since the Comcast and NBCU merger. If we were to see another huge media merger, I could see Verizon and/or Sprint wanting to go after Disney-ABC, CBS Corporation, Viacom, or 21st Century Fox. The idea of Apple wanting Disney-ABC is kind of a head scratcher. Don’t know whether there’s been rumblings of CBS and Viacom getting back together either.

  3. Jacques Strappe says:

    Apple should stick to it’s strength, technology and Disney to entertainment. I think a Disney acquisition of Netflix makes more sense as an established gigantic world wide streaming subscriber base for Disney treasured film content and a platform for ABC television content, in addition to continuing to be a platform for other networks unwilling to invest in a streaming service as large as Netflix. . ESPN could also become a component of Netflix, again with a global streaming focus for individual foreign markets.

  4. Royce says:

    Sony did a “content” studio purchase way back in 1989 – buying Columbia / Tri-Star — They did this to back up their electronics business. Sony knew the benefits. —– Meanwhile – Michael Eisner wants more control of Disney (he is already using his TOPPS to do this) – and thus Eisner will put his son(s) Eric & Breck into Disney.

  5. joe says:

    At some point the new economy/technology giants are going to be gobbling up content providers. Mark my words it’s coming. Amazon, Google and Apple are three behemoths who have more than ample resources and are already producing content so why not accelerate that to some degree through acquisition.

  6. Joel Emmett says:

    Sounds as good an idea as AOL buying Time Warner, and that worked out great, right?

  7. flavious27 says:

    This is one analyst that needs to be fired. Apple is not going to use all of their liquid assets and borrow funds for an acquisition. Those funds are going to be needed while they look at stabilizing their mobile business. The combined company is not going to spin off two prized assets that are also two large components of this deal.

  8. Paully says:

    A very smart move..
    Have you noticed the the food at Disneyland has improved a lot since us Norther Californians took over (Pixar, Lucasfilm merger), us Northern Californians asked “how can you LA people live like this”..

  9. The Truth says:

    Some critics slam Iger-era Disney as being creatively bankrupt for re-making old animated hits in live action and Cook-era Apple for timidly refining Jobs-era innovations rather than developing anything new. Yet both companies are enormously successful industry leaders, and whoever the critics are and whatever they say is totally inconsequential. If Apple buys Disney, investors will be laughing at these irrelevant detractors all the way to the bank.

  10. gabe says:

    hasn’t apple been part of Disney for a long time?

  11. Chris Gapske says:

    I sure hope not Apple knows nothing about operating this type of business. They are out to make money only.

  12. Blech, I can imagine the tech entrepreneurs just Applefying Disney and watching the charm disintegrate.

  13. Baron Munchausen says:

    If you want the creativity and the imagination to stop, of course!

    • But if Apple buys Disney, then the barriers of Disney just creating family-friendly content for ABC, and family-friendly limitations on ESPN would end, and that would be the most healthiest thing for both networks.

      Then again, Disney could spin off ABC too along with ESPN and theme parks so investors are guaranteed the best palatable situation you can be in.

      Of course, Apple has trillions of dollars in cash, no matter where Apple accesses it, to make this Disney buyout happen.

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