Entertainment & Media The Walt Disney Company

Apple Buying Disney Rumors by Wall Street Analysts Gaining Momentum

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Last month, we covered a report by Yahoo Finance that RBC Analyst Stephen Cahall was speculating that Apple might use its $237 billion pile of cash to buy The Walt Disney Company. Today this story has resurfaced in many media outlets (Barron’s, Variety, /Film, TheStreet, and BusinessInsider, to name a few), after three RBC analysts released an extensive report on the possibility.

“We have seen increased discussions among investors regarding ‘How could AAPL gain scale in media/content and what could it do with potential cash repatriation?’ Media assets could be part of AAPL’s M&A strategy and [CEO] Tim Cook has noted that deal size isn’t a negating factor,” RBC analyst Amit Daryanani wrote in a note Thursday.

“AAPL’s focus on services and its inability (so far) to replicate its music/iTunes strategy into content/media make acquiring DIS logical in our view. This is particularly true if AAPL can access $200B+ offshore cash via repatriation holiday. There are plenty of factors to consider, but such a deal would create a tech/media juggernaut like no other and instantly scale AAPL’s services, content, and media portfolio, which would make the case for a higher valuation.”

Even though Disney stock hit a 52-week high today at $113 and change, and analysts predict Apple paying a 40% premium, the analysts conclude that while “odds are low,” the possibility of a takeover is “greater than 0%”. However, for Apple to be able to spend that $237 billion in cash, it will have to repatriate much of it from overseas. Under current tax laws, this would be prohibitively expensive (hence the cash is still overseas). However, if the US government provides a “tax holiday” for US corporations to repatriate cash to the US at a far smaller tax rate, Apple could end up with $220 billion in cash in the US to make an acquisition.

The analysts go on with the strategic rationale for the merger:

“The best justification for such a mega deal, in our view, is the ability to do things together that neither company, nor any other company, could do. The sheer scale of a combined company offers some unique opportunities, and we’ve tried to identify some of the more compelling ones below.

“More importantly, Apple and Disney are each not just industry leaders in their own right but titans of industry on a global scale with truly unique products and services. Few people on earth are not already familiar with both companies’ products, yet they don’t compete in any meaningful sphere at the moment. The question therefore becomes what can they do together that they can’t do apart? The answer is they can do just about anything given the technology and financial resources.”

So, while the “odds are low” at the present time, I fully expect this story to gain a lot of traction if there is a corporate tax holiday for US companies to repatriate overseas cash. Right now, investors want Apple to spend its cash, but it’s not a wise move at the current tax rate. If the tax rate ceases being a roadblock, investors are going to clamor for Apple to do something with its cash that will bring a greater return to the company. So even if it doesn’t buy Disney, expect Apple to make some major moves if it can access the overseas cash cheaply.

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About the author

Jason Diffendal

Jason has been a lifelong fan of the Disney parks since his first visit at age 2. His biennial pilgrimages during his childhood accelerated into semi-annual visits by the year 2000, when he also Joined the Disney Vacation Club. Luckily, Jason’s bride-to-be was also a Disney fan, which allowed his infatuation with the Disney parks to continue, and ultimately culminated in their wedding at Disney's Wedding Pavilion in September 2003. Early in 2007, Jason began his involvement with the planning for what became Celebration 25, the unofficial fan gathering to commemorate the 25th anniversary of Epcot®. Soon thereafter, Jason met Tom Corless at a pin trading meet in New Jersey, and became part of the WDW News Today podcast starting with Episode 17. Jason has been involved with the WDWNT Network ever since, and can't seem to escape no matter how hard he tries.

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  • That’s all a Disney visitor needs to see when in Disney World, technology marketing being shoved in your face and down your throat threw out the parks. I hate Apple already and if they do this they will remove the adulterated purity that makes Disney a loving happy place and replace it with their constant product ads and “agenda”. If Disney sells, I’m giving up on Disney too. This better he a B.S. story!!

    • How about you do some research on the history of WDW and corporate sponsorship/advertising? Or, you could continue to blabber on with no clue what you are talking about, like an idiot child. Your choice.

  • Seeing how the current Disney management is propping up the company (particularly the parks), makes nothing but sense: Producing nothing internally and just buying out/copying what other people do, overrated & expensive products with all shine, no substance, constantly screwing up its customers & a masochist sheep fanbase that screams shut up and take my money.

    It was nice knowing Disney while it lasted

    • But how else would they get emotionally stunted shut-ins like yourself to comment on a news site for a company you obviously hate?