CNBC’s Jim Cramer and a host of other experts doubt reports that Apple will find the cash to pull off a $200 billion-plus takeover of Disney and create an entertainment and technology empire worth $1 trillion.
RBC Capital Markets research analysts issued a speculative analysis, issued to clients Thursday, which said such a colossal tie-up would be contingent on Apple getting tax breaks to “repatriate” overseas cash.
“Recently, investors have increased their expectations that Apple could seriously consider acquiring Disney,” RBC analysts Steven Cahall and Leo Kulp wrote in the note, Reuters quoted Variety.com as reporting.
While admitting that the odds of such a tie-up “are low,” RBC research analyst Amit Daryanani wrote in a second Thursday note that “We see a confluence of events that make an acquisition of DIS [by Apple] a ‘greater than 0%’ probability event.”
“AAPL’s focus on services and its inability (so far) to replicate its music/iTunes strategy into content/media make acquiring DIS logical in our view,” the analyst explained, adding: “This is particularly true if AAPL can access $200B+ in offshore cash via repatriation holiday.”
Others experts agree that the odds, and logistics, of such an entertainment and tech megamerger are large indeed.
“Why am I so dismissive of this? Because while the combination is rational … the Disney analyst who promoted the idea calls the option — the possibility — ‘greater than zero percent,'” “Mad Money” host Jim Cramer said. “Talk about a low bar. They’re basically just saying anything’s possible,” Cramer explained on his CNBC show.
For Cramer, the biggest problem is the degree of speculation that went into the analyses.
“Like ‘Aladdin,’ like ‘Lion King,’ the story is fiction,” he said. “Apple hasn’t done any big deals like this, although the company did say in one conference call that they’re open to them,” Cramer said.
“The fact is that if you buy Disney’s stock on this, I’d tell you that you might as well believe in Mickey Mouse and Donald Duck and Han Solo and Captain Marvel and anybody else in the stable,” Cramer said.
Other experts all day long Thursday on CNBC agreed.
“One large company buying another large company really just isn’t good business sense,” Erin Gibbs, equity chief investment officer at S&P Global, told CNBC.
“Being categorized as a media entertainment company could possibly increase Apple’s multiple,” Gibbs acknowledged in an email to CNBC, “but most of the criticism of Apple revolves around its slowing growth, and Disney is growing at a slower place. One would more likely expect an acquisition to increase the growth rate rather than lower it.”
Disney makes a lot of its money from theme parks, and technology products drive Apple, so “the two companies have very little overlap when it comes to the main revenue sources,” Gibbs explained.
“I do see some merit in it, but it is an off-the-wall proposal,” Mark Tepper of Strategic Wealth Partners said Thursday on CNBC.
Disney stock closed slightly higher at $113.20, after hitting hit a 16-month high Thursday. Apple stock closed down 75 cents Thursday at $141.05.
(Newsmax wires services contributed to this report).