Apple‘s cash pile of more than $US200 billion is a favourite topic of investors, bloggers, and traders. It might be the largest cash reserve for any private company in history.
So what is Apple going to do with all that dough?
One theory is that Apple will use its stockpile to buy Disney, according to RBC analyst Steven Cahall:
“Bulls think it portends well for a swan song exit via a sale to a giant like AAPL,” Cahall wrote in a note sent out to clients on Friday.
After all, we are living in a world where “content is king.” Currently, there is a battle raging among content providers for your eyeballs. Content providers, want you hooked and ready to consume more of your favourite content and all of the other licensed products that go along with it.
When analysts and investors think of content, Disney is the first name that comes to mind.
Disney’s “Frozen” is the highest-grossing animated film of all time.
Additionally, five of the 10 highest grossing films of 2016 were Disney movies: “Captain America: Civil War” was the highest grossing film of 2016 with 1.153 billion in revenue, also included were, “Finding Dory”, “Zootopia”, “The Jungle Book”, and “Star Wars: Rogue One.”
RBC is not the only one speculating an Apple takeout of Disney is a possibility.
In her fourth-quarter investor letter for 2016, Samantha Greenberg, founder of hedge fund Margate Capital, raised the same possibility, describing the company as a “logical acquisition target” for Apple:
Apple has talked about the benefit Apple sees when it owns exclusive content, and owning Disney would reduce Apple’s exposure to product cycles, expanding AAPL’s valuation multiple…It would also be an accretive use of Apple’s cash and even more so if Apple’s $US200Bn of offshore cash can be repatriated favourably.
Additionally, in November 2016, Liberty Media Chairman John Malone predicted that if Disney were to spin-off ESPN, Apple could buy it.
“Fundamentally, Tim Cook is a global player, and fundamentally, ESPN is a domestic service,” Malone said, that Apple and Disney would be a better fit without ESPN because then they would both be global players without domestic ESPN holding them back.
This a story that won’t be dying down anytime soon.
Disney is up 7.75% so far this year, click here for a real-time DIS chart.