Would Apple buy Disney?

For years, Wall Street has wondered if Apple and Disney might join forces.

The subject received fresh attention this week, when an analyst suggested the two companies would be more valuable as a combined entity.

"Strong distribution and world-class content are complementary networks. That is, they are worth more together than separately,” Needham analyst Laura Martin wrote in a note to clients.

The comments come as Disney CEO Bob Iger prepares to update shareholders on Monday at the company’s annual meeting about his turnaround strategy.

While Iger’s current plans may not include a deal with Apple, there are plenty of enticing reasons why the market chatter seems justified.

A long history 

Whenever this merger subject comes up, we’re reminded that, unlike other tech companies, Apple rarely makes big acquisitions.

But we may have to ignore that logic in this case, because the ties between Disney and Apple run deep.

In fact, Iger, in many ways, is the connective tissue.

It was Iger who, early during his tenure as CEO, mended fences with Steve Jobs and Pixar, paving the way towards Disney’s $7.4 billion acquisition of the animation studio.

Jobs became Disney’s largest shareholder, a board member, and extremely influential at Disney behind the scenes.

He also grew close to Iger, who himself added to deal speculation in his own memoir.

“I believe that if Steve were still alive, we would have combined our companies, or at least discussed the possibility very seriously,” Iger wrote in “The Ride of a Lifetime.”

Note Iger previously spent 8 years on Apple’s board of directors.

A unique moment in time 

Iger, who returned to Disney last year after the ousting of his hand-picked successor Bob Chapek, is navigating a lengthy to-do list.

That includes cutting 7,000 jobs, in an effort to eliminate $5.5 billion in costs — a response, in part, to pressure from activist investor Nelson Peltz.

There’s also the political power struggle in Florida.

But beyond that, there are broader questions around Disney’s long-term plans.

The company made huge inroads in streaming, but gaining sizable market share was a costly endeavor.

And while it is clear Iger does not see a bright future for linear programming, it is unclear how much of Disney’s broadcasting empire can transition to digital.

Seeing these issues through could take years.

Iger though, who is 72, has said he would prefer to be CEO for only two years.

How long until Wall Street starts worrying again about the succession plan?

Teaming up with Apple would seem to unlock an endless number of options.

Disney could focus on its mission statement — to entertain, inform and inspire — which could blend well with Apple’s own values, around making the best products.

As analyst Laura Martin argued this week, Apple could easily leverage Disney’s massive customer base through its own “distribution footprint of 1.25 billion unique consumers,” who are actively using 2 billion Apple devices, each for an average of four hours per day.

While Disney is shuttering its metaverse unit as part of its cost-cutting plan, Apple is reportedly gearing up to unveil its mixed reality headset at its WWDC developer event in June.

Mark Zuckeberg struggled to convince consumers to step into the virtual world.

Could Apple be more successful with Disney at its side?

And there are more immediate ways Disney could help Apple, such as movie distribution.

According to Bloomberg, Apple will spend $1 billion a year to produce films that will be released in theaters.  But coming to terms on distribution deals has reportedly been one of the hang-ups. 

Then, of course, there are theme parks and the cruise lines, which Steve Jobs admired.

Can you imagine the synergies from using Apple’s headsets in a controlled, real world setting such as Disneyland?

Name your price…

Let’s assume, for a moment, the two companies might find themselves aligned on the idea of merging.

There is, of course, the tricky question of price.

Disney’s market value is currently $180 billion.

On average, analysts polled by Bloomberg think the stock could rise 25% in the next year.

If that happens, Disney could be worth $230 billion in a year’s time.

That would still be below Disney’s peak valuation of more than $350 billion in 2021.

Could Iger get a price closer to that level, which would double returns for current shareholders?

As for Apple, analyst Laura Martin reckons that owning Disney could create as much as 25% valuation upside for Apple shareholders.

If she’s right, that would be roughly $650 billion in value for Apple.

Apple could certainly use some of massive cash pile on the deal.

Would it be willing to spend $350 billion if it created $650 billion in value?

Interesting times, indeed!