Friday, April 14, 2017

Street Talk: Apple, Disney Merger Talk Resurfaces

Variety is reporting 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.”

RBC gave six reasons why Apple may buy Disney:
  1. "Accelerates AAPL's push into services and content."
  2. "Instantly leapfrogs Netflix, Amazon, and YouTube in content and resets the lead with content narrative."
  3. "AAPL has been unable to replicate its music playbook to video."
  4. "Iconic brand — there are few brands that AAPL could acquire that wouldn't dilute its iconic presence and customer relationships; DIS would clearly strengthen (and not dilute) the brand value."
  5. "Even using minimal cost synergy, we see the deal being accretive by 15-20 percent."
  6. "AAPL has been increasingly looking at larger deals and noted that services is a focus."

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