An Apple Takeover of Disney?
By Dave Shute
APPLE AND DISNEY, TOGETHER AT LAST?
Greg Sawchyn has an interesting speculative article today on Seeking Alpha, grounded in how Apple might spend its $100 billion pile of cash.
Where is Apple’s “headline grabbing growth going to come from in the future?,” he asks…and continues “[p]ure speculation of course, but the answer is Disney.”
An interesting thought…one with many things going for it…but I doubt it.
There’s plenty of business and management synergies, centered on a common commitment to design quality and detail, and of course the value of Disney’s content delivered exclusively over Apple platforms is key to the business case.
But there’s a couple of issues I can’t get my mind around…
First, at Apple’s current share price, how could its board do an acquisition for anything other than a predominately share-based offer? Which then does little for the cash pile…
Second is the problem of the huge difference in growth potential. Disney is a growth company…but not like Apple…so there will be issues with resulting PE multiples and challenges in valuing the combination.
Finally, I don’t see where the price premium on the Disney shares is earned back. Greg’s $65 a share figure is about a $40 billion premium to Disney’s current market cap, and I don’t see any practical way for the combination of Disney and Apple to yield the value implied by that difference. Yes, Disney content could be made exclusively available on Apple devices, but I suspect that might even drop overall Disney profitability, rather than increase it, from its loss of channels of distribution. Moreover, much of what Disney and Apple might do together they could do today under licensing deals, and I have trouble seeing what’s left beyond that as worth $40 billion.
The problem with excess cash is always whether the company can invest it more wisely than could its shareholders. If not, the cash ought to be distributed to Apple shareholders. The shareholders can then buy Disney stock if they wish. What the shareholders can’t do is force the kinds of content collaboration that Greg is thinking about…but Apple management can pursue at least some of those via license, if it sees the value. Licensing would mean that some of the value of the new stuff would accrue back to Disney, of course, rather than Apple…but not $40 billion worth…
All the same though, an interesting idea, worth a read…
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