Would Apple go after Disney before the ink dries on the Fox deal?

Disney is a huge entertainment company that is getting bigger after this week's agreement to buy 21st Century Fox for almost $53 billion. Disney itself has often been mentioned as being in play. But with a market cap above $168 billion, not too many firms could afford to make a bid. But there is one tech giant who could not only buy the House of Mouse, it also would be a good fit. And in fact, the estate of this tech firm's co-founder is the largest owner of Disney shares. If you haven't figured it out yet, we are talking about Apple.

Earlier this year, we passed along the thoughts of RBC Capital Markets analyst Amit Daryanani who wrote to clients last April about the positives that could come from such a transaction. Daryanani was quick to say that such a deal is highly unlikely. Today, more than six months later, Forbes looked at the possibility of  an Apple acquisition of Disney. Large flashy transactions have not been Apple's style and the largest transaction it ever made was the $3 billion pick up of Beats Audio. Compare that figure to Disney's current market value of $168 billion. Add on a 30% premium and you're talking about spending almost $220 billion. That is a ton of money, not that Apple can't afford it.

Purchasing Disney would make Apple a huge media player and would allow the company to take advantage of Disney's plan to create its own streaming video app using its iconic characters and stories. Already, Disney said that it would stop giving Netflix access to its first run theatrical releases starting in 2019. 

When Apple co-founder Steve Jobs helped to fund Pixar, he became a major stockholder of the computer graphics company. Those shares were converted into Disney stock when the latter purchased Pixar. And the Steven P. Jobs Trust remains to this day, the largest stockholder in Disney. Assuming that Jobs' widow, who runs the Trust, is happy with any proposed deal, Apple could count on a large block of Disney to vote in favor of such a transaction.

Would Apple be getting its monies worth? A number of Wall Street analysts say that such a deal would add to Apple's earnings, and owning the Disney name would enhance Apple's own standing as an iconic global company. The value of Disney is also found in its library of films and television shows, which is an asset that Apple is a position to distribute through various technologies. And Apple would be able to promote its brand in the two U.S. parks located on each coast.

If Apple has any thoughts toward making a play for Disney, it needs to do so with a sense of urgency. Once the deal for 21st Century Fox closes in as soon as a year, any purchase of Disney becomes more complicated and harder to accomplish.

Nothing has really improved the odds of an Apple acquisition of Disney taking place since the last time we addressed this. But as time goes on, it becomes more important for Apple to consider becoming a huge player in content. After all, it is content that drives hardware sales, which is where Apple currently lives.

source: Forbes