Wall Street Dreams of Apple-Disney Megamerger

Apr 13, 2017

Investors are increasingly considering whether Apple should buy Walt Disney Co. to give both companies a major boost as the consumer technology and entertainment industries continue to converge, RBC Capital Markets analyst Amit Daryanani observed in a report on Thursday. The analyst said he favored such a deal, but didn't offer any evidence that either company was actually working on the theorized transaction.

A combination would strengthen both companies, giving Disney stronger distribution for its content as consumers turn increasingly to their mobile devices, while Apple could build the Internet-based video service it has long sought, Daryanani wrote. Apple would need to pay $237 billion for Disney, or $157 per share, using a combination of cash and debt, the analyst estimated.

"We currently place a 'greater than 0%' probability on the notion that (Apple) is seriously considering (Disney) as an acquisition target," the analyst wrote in a 27-page report. "More important is whether or not the market is giving it a serious consideration, and our conversations suggest that investors are giving such a transaction far more consideration than they were three or six months ago."

Fortune reached out to Apple and Disney for comment and will update this story if responses are received.

Growing interest in an Apple-Disney mega-merger on Wall Street comes after Apple CEO Tim Cook and other executives hinted several times that they might be looking for a media company to acquire. Apple executives also reportedly discussed acquiring Time Warner (twx), home of HBO and the Warner Bros. studio, before AT&T (t) snapped up the media titan for $109 billion including debt last fall.

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Still, rumors about a possible deal between two of the most iconic brand names in American business history have circulated for years without ever coming to fruition. Steve Jobs was close to former Disney CEO Robert Iger and served on Disney's board after selling his animation studio Pixar to the company in 2006, fueling much of the earlier speculation.

"Our conversations with investors suggest that this potential merger of industry titans is certainly something that equity investors like to kick around, either because they believe it can happen or because it’s just so much fun to think about,"Daryanani wrote. "Media and tech investors span the full range from thinking a deal is improbable to highly probable, with no real consensus."

Apple (aapl) and Disney (dis) together would have about $285 billion of revenue, Daryanani noted. Based on estimates of 2018 financial results, the combination should be worth $920 billion in the stock market, or $1 trillion including debt, the analyst forecast. "Look out, Saudi Aramco—the trillion dollar club just grew to a party of two," Daryanani wrote.

The prospects for the theorized deal would get a boost if President Trump and Republicans in Congress agree on a tax reform measure that includes letting multinational companies like Apple bring back overseas profits more easily. Apple has over $200 billion in cash outside of the United States that it currently cannot repatriate without paying a 35% tax rate.

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