Analyst floats idea of Apple buying Disney to make 'tech/media juggernaut'
A new analyst report suggests that Apple should acquire long-time media partner Disney to smooth out seasonal concerns about earnings and make a massive end-to-end media development and delivery platform -- but this is not the first time this unlikely scenario has been bandied about.
In a research report provided to AppleInsider by RBC Capital markets, analyst Amit Daryanani sees a "confluence of events" involving potential cash repatriation that could end up seeing Apple buying Disney. A potential buyout would "instantly scale AAPL's services, content, and media portfolio," strengthen Apple's already iconic brand, and would leapfrog Amazon, Netflix, and YouTube's offerings in one fell swoop.
Daryanani assumes that Apple would pay about a 40 percent premium on top of Disney's current price, putting it at around $157 per share. This would tap most of Apple's $200 billion available for acquisitions, and would require a significant debt acquisition to complete.
Other benefits to Apple cited in the report are global sports rights given that Disney owns sports network ESPN, a proving ground for technologies at Disney parks like augmented reality and virtual reality, product diversification, and unspecified cost synergies. As a result, Daryanani sees Apple stock climbing nearly instantly about 25 percent after any deal with Disney.
Besides just Disney-branded properties, the company owns "Star Wars" franchise producer Lucasfilm including special effects studio Industrial Light & Magic, "Thor: Ragnarok" developer Marvel Studios, ABC television, A&E Networks, and Pixar Animation Studios, amongst others. Also included in any deal would be the several Disney tourist attractions, a giant retail and merchandising arm, and a massive patent portfolio.
Apple founder and CEO Steve Jobs founded Pixar Animation Studios. Following Pixar's merger with Disney in 2006, Jobs joined the Disney board of directors. At the time of Jobs' death, his stake in Disney was said to exceed $4.6 billion.
As Apple fought to stay alive in the mid-'90s, rumors frequently circulated that Disney was examining Apple for an acquisition target. More recently, after Apple's ascension after the iPod and iPhone successes, the speculation shifted in the other direction, leading to off-and-on speculation for the last decade about Apple and Disney merging to form a company with a trillion-dollar market capitalization.
Even Daryanani sees the deal as just barely possible but still unlikely. The report cites a "greater than 0 percent" chance that Apple is considering the buy, but conversations suggest that there is far more consideration being given to an acquisition than there was six months ago.
In a research report provided to AppleInsider by RBC Capital markets, analyst Amit Daryanani sees a "confluence of events" involving potential cash repatriation that could end up seeing Apple buying Disney. A potential buyout would "instantly scale AAPL's services, content, and media portfolio," strengthen Apple's already iconic brand, and would leapfrog Amazon, Netflix, and YouTube's offerings in one fell swoop.
Daryanani assumes that Apple would pay about a 40 percent premium on top of Disney's current price, putting it at around $157 per share. This would tap most of Apple's $200 billion available for acquisitions, and would require a significant debt acquisition to complete.
Other benefits to Apple cited in the report are global sports rights given that Disney owns sports network ESPN, a proving ground for technologies at Disney parks like augmented reality and virtual reality, product diversification, and unspecified cost synergies. As a result, Daryanani sees Apple stock climbing nearly instantly about 25 percent after any deal with Disney.
Besides just Disney-branded properties, the company owns "Star Wars" franchise producer Lucasfilm including special effects studio Industrial Light & Magic, "Thor: Ragnarok" developer Marvel Studios, ABC television, A&E Networks, and Pixar Animation Studios, amongst others. Also included in any deal would be the several Disney tourist attractions, a giant retail and merchandising arm, and a massive patent portfolio.
Apple founder and CEO Steve Jobs founded Pixar Animation Studios. Following Pixar's merger with Disney in 2006, Jobs joined the Disney board of directors. At the time of Jobs' death, his stake in Disney was said to exceed $4.6 billion.
As Apple fought to stay alive in the mid-'90s, rumors frequently circulated that Disney was examining Apple for an acquisition target. More recently, after Apple's ascension after the iPod and iPhone successes, the speculation shifted in the other direction, leading to off-and-on speculation for the last decade about Apple and Disney merging to form a company with a trillion-dollar market capitalization.
Even Daryanani sees the deal as just barely possible but still unlikely. The report cites a "greater than 0 percent" chance that Apple is considering the buy, but conversations suggest that there is far more consideration being given to an acquisition than there was six months ago.
Comments
This would present zero anti-trust problems. Apple and Disney have virtually no overlap in their business lines. Therefore, in no market would this result in a reduction in competition. This would be like Wal-Mart buying General Motors or Google buying Boeing--a merger of two behemoths but not the combination of two competitors.
But just to be clear, this ain't going to happen.
The statement "this would present zero anti-trust problems" is based on the assumption both companies would continue to work completely independently of each other and would enter into licensing & distribution agreements with other companies (Samsung or CBS Corporation for example) on the same terms and conditions as the now related companies. The only way to ensure that happens is to have anti-trust regulators scrutinize transactions between the two companies to ensure they are done at arms length. Even though there is little overlap in their current business lines there are still a multitude of ways consumer choice could be harmed by the combined company.
In your example what would happen if Wal-Mart bought General Motors but followed up by saying the only place you can buy a GM product is through Wal-Mart? It is certainly possible if Apple bought Disney that it would institute a period of exclusivity for digital distribution of Disney/ABC/Marvel movies to Apple products. That would be harmful to consumers who use competing products. Maybe they would also offer substantial discounts to Disney theme parks only if you paid for the tickets with ApplePay which would be harmful to Samsung Pay consumers.
Horizontal consolidation of direct competitors is not the only anti-trust issue. The potential for vertical integration after-the-fact has to be considered as well.
Stupid, stupid idea.
I'd expect them to float off the theme parks though.
At least then the other studios and creators would have to engage with apple instead of ignoring them.
Would it happen?
Probably not.
At $157 a share, Disney would cost around $250 billion. Apple has around $160 billion in cash net of debt. If we're talking about using repatriated cash, which the OP suggests, that pile would likely be somewhat smaller due to some taxes being paid on those remitted foreign earnings. At 10% that would cost around $20 billion. And in acquiring Disney, Apple would be taking on a little bit of additional debt (net of cash) that Disney has. Could Apple do it? Sure. But I don't think it would and I don't think I'd want it to. The debt that Apple would have to take on is not my only concern.
Also... for accuracy's sake, though it isn't that important... at the time of his death Mr. Jobs' stake in Disney was worth around $4.35 billion.
And yes, the idea that Apple would buy Disney is quite possibly the stupidest thing I've heard this week.
http://www.gartner.com/newsroom/id/1543014
Niche, in the scheme of things yes.
Tech, yes but very low tech.