There are some rumors that just don’t die, especially when it comes to Apple Inc (NASDAQ:AAPL) , and one such rumor is the notion of the iPhone maker acquiring Walt Disney. This rumor has reared its ugly head multiple times in the past, and here it is again. Yes, we have another analyst arguing that the House of Mouse is a “logical” acquisition target for AAPL.

Apple AAPL to buy Walt Disney?

Murmurings about the iPhone maker buying Walt Disney go back at least as far as 2014 when North River Ventures Managing Director Francis McInerney floated the idea, if not before that. This time, however, it’s RBC Capital Markets analyst Amit Daryanani who suggested it, and it’s not the first time the firm’s analysts have argued in favor of it. His colleague Steven Cahall, who covers Disney, also argued for it last month.

Margate Capital’s Samantha Greenberg also suggested in January that Apple could buy Walt Disney, again using that word “logical,” just as RBC did. She discussed her firm’s stake in Disney at length and said that by purchasing the content giant, Apple would be able to reduce its exposure to product cycles. Also like RBC, she said such a deal would expand its multiple and be an accretive use of its cash.

Specifically, Greenberg stated:

apple walt disney

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Apple AAPL to buy Walt Disney?

Murmurings about the iPhone maker buying Walt Disney go back at least as far as 2014 when North River Ventures Managing Director Francis McInerney floated the idea, if not before that. This time, however, it’s RBC Capital Markets analyst Amit Daryanani who suggested it, and it’s not the first time the firm’s analysts have argued in favor of it. His colleague Steven Cahall, who covers Disney, also argued for it last month.

Margate Capital’s Samantha Greenberg also suggested in January that Apple could buy Walt Disney, again using that word “logical,” just as RBC did. She discussed her firm’s stake in Disney at length and said that by purchasing the content giant, Apple would be able to reduce its exposure to product cycles. Also like RBC, she said such a deal would expand its multiple and be an accretive use of its cash.

Specifically, Greenberg stated:

It’s also worth noting that with the announced sale of Time Warner to AT&T, Disney is the last remaining publicly traded non-controlled Content/IP company. With or without an ESPN spin, we believe Disney is a logical acquisition target for AAPL. 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 $200Bn of offshore cash can be repatriated favorably.

 

Apple AAPL Walt Disney DISIndeed, it’s certainly a sexy idea designed to capture headlines, although even Daryanani himself notes that it is very unlikely for such a deal to happen.

How Apple could use its cash

The reason this rumor comes up so frequently is because Wall Street wants to write its own story about what Apple could do with the cash hoard it’s been sitting on for many years. Just wait; someone is probably already writing up a case for the company to buy Tesla. It’s practically a guarantee because that suggestion pops up at least as often as the Disney theory.

In this case, Daryanani makes the suggestion of a Disney deal as a way for the company to use the cash it could repatriate if President Trump decides to offer up a tax holiday, something else we’ve been hearing could happen since before his inauguration. Daryanani claims that he’s been seeing “increased discussions among investors” about how Apple could “gain scale in media/content” and also about what it could “do with potential cash repatriation.”

A focus on media?

He noted that media assets may be part of the iPhone maker’s merger and acquisition strategy and also that CEO Tim Cook has said that the size of a deal doesn’t matter. As such he sees “a confluence of events that make an acquisition of DIS a ‘greater than 0%’ probability event) while odds are low,” he said in his note dated April 13.

The analyst feels that the recent focus on services revenue and its “inability (so far) to replicate its music/iTunes strategy into content/media” make Walt Disney a “logical” acquisition target for Apple. He feels this is especially true if the iPhone maker is able to access its more than $200 billion in offshore cash via a holiday on repatriated cash.

He notes that although there are lots of factors here, a merger between the two companies would create “a tech/media juggernaut like no other and instantly scale AAPL’s services, content, and media portfolio.” In turn, he notes that this would make the cause for a higher multiple on Apple stock.

He said a deal between the House of Mouse and the iPhone maker would instantly push the merged company over Netflix, Amazon and YouTube in terms of content. Further, he feels that there aren’t many brands the company could acquire that wouldn’t “dilute its iconic presence and customer relationships.”

The RBC analyst suggests that the company could pay a 40% premium to Walt Disney’s current price, which is similar to the 35% premium AT&T paid for Time Warner. This would slap a value of $157 per share or an equity value of $237 billion on Disney. He estimates that Apple has about $200 billion in cash available for acquisitions but stashed overseas, so he said it could use that cash and fund the rest with debt.

AAPL & Dis – Why this will probably never happen

On the flip side, he notes that Apple hasn’t done any deals bigger than the $2.2 billion it paid for Beats, and such a deal would be a shift from its music strategy. Further, it would block the company’s ability to host all content because it would only host Disney DIS content, and there would be some risks with integrating the acquisition. Interestingly, he also suggests that such a deal “would implicitly send a message about iPhone maturity.”

What he doesn’t suggest that the naysayers would say is the fact that his pricing scenario would eliminate Apple’s war chest — something no tech firm would ever do. This argument is probably bigger than all of the ones Daryanani mentioned because most big tech names have sizable war chests for acquisitions and other needs. This is why most push back when investors try to push them to hand out some of their cash, so it’s hard to imagine Apple paying out all of its overseas cash to buy Disney DIS.