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The Case For Why Apple Should Buy Disney

The Case For Why Apple Should Buy Disney

Here's a thought: Apple Inc. (NASDAQ: AAPL) should use its giant trove of cash to acquire Walt Disney Co (NYSE: DIS). Sounds crazy, right? Not so much when considering this idea has been floated before but is now being given serious thought from Wall Street analysts.

CNBC's Carl Quintanilla tweeted on Thursday a summary of why analysts at RBC Capital Management believe an acquisition of Disney by Apple makes sense.

The analysts highlighted two of the most hotly debated conversations around Apple's investors: 1) how the company can gain scale in media and content, and 2) what should Apple do with its hoard of overseas cash that could make its way back to the U.S. under a favorable tax plan from the White House.

The analysts emphasized that given Apple's focus on services and a failure to duplicate its music and iTunes strategy into content and media makes acquiring Disney "logical."

The price tag on a deal, even at a 40-percent premium to Disney's current stock price implies an equity value of $37 billion. Apple could gain access to its $200 billion-plus of cash overseas and fund the remainder through new debt.

Under this scenario, the deal should be 18 percent accretive to Apple's shareholders.

Low Probability, But Not Zero

The analysts further suggested that while the probability of Apple acquiring Disney is "low" the odds of such a move is "greater than zero."

"There are plenty of factors to consider, but such a deal would create a tech/media juggernaut like no other and instantly scale Apple's services, content, and media portfolio, which would make the case for a higher valuation," the analysts also argued.

Related Links:

Offshore Cash Repatriation, And The Bull Case For Apple

Apple's Q1: Here's The Bottom Line

Latest Ratings for AAPL

Jan 2021BarclaysMaintainsEqual-Weight
Jan 2021Canaccord GenuityMaintainsBuy
Jan 2021Credit SuisseMaintainsNeutral

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