Apple (AAPL) Should and Could Buy Disney (DIS) - RBC

After talking with investors about how Apple (NASDAQ: AAPL) can gain scale in media/content and what it could do with its potential cash repatriation, RBC Capital Amit Daryanani speculates that a Disney (NYSE: DIS) takeover would make sense.

Daryanani highlighted that CEO Tim Cook has noted in the past that deal size isn’t a negating factor and while "odds are low" the possibility of a DIS takeover is "greater than 0%".

The analsyt said Apple's focus on services and its inability to replicate its music/iTunes strategy into content/media make acquiring DIS "logical" in their view.

Accessing its $200B+ in offshore cash via a tax holiday make the possibility even greater.

Looking at the math of a deal, the analyst assumes Apple would pay ~40% premium to DIS’s current price (similar to 35% premium paid by AT&T for TWX), valuing it at $157/share. This implies an equity value of $237B. In a cash repatriation scenario, AAPL should have ~$200B of cash available for acquisitions, with the remainder funded with debt. We estimate that with 2% of combined EBITDA as synergies, the deal should be 18% accretive to AAPL shareholders.

Daryanani said a deal with Disney 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 firm maintained an Outperform rating and price target of $155 on AAPL.

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $141.80 yesterday.

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