Apple’s purchase of Disney would create an unprecedented entertainment giant

Business titans Apple and Disney could merge into one giant company, which experts believe will benefit both companies.

Apple, Inc. and The Walt Disney Co. have a longstanding relationship, epitomized by the fact that returning Disney CEO Bob Iger was friends with the late Apple founder Steve Jobs.

While Apple and Disney appear to be fluttering their eyelashes, any potential merger or acquisition “almost certainly” will be met with resistance and “shareholder lawsuits,” according to a financial attorney.

Talks of a collaboration were reignited recently when Needham analyst Laura Martin told her clients that an acquisition would make Apple 15 to 25 percent more valuable. So how likely is a merger or acquisition between the two at this point?

The story of Apple and Disney

Steve Jobs is the most obvious link between the tech company and the entertainment conglomerate best known as Apple’s co-creator and later CEO.

He was also the controlling shareholder of animation studio Pixar before selling it to The Walt Disney Company in 2006. As part of the deal, Jobs became a member of The Walt Disney Company’s board of directors, a position he held until his death in 2011.

Disney’s acquisition of Pixar almost never happened when, after failed negotiations with former Disney CEO Michael Eisner, Jobs announced in 2004 that Pixar would never work with Disney again. When Iger replaced him in 2005, he mended the relationship and Disney bought Pixar for $7.4 billion.

Iger was later appointed to Apple, Inc.’s board of directors in 2011, but left his position in 2019 as the two companies prepared to compete in the streaming wars.

There is currently no overlap between content on Apple TV+ and Disney+ (both launched in November 2019). A collaboration between the two would certainly be bad news for competitors like Netflix and Prime Video.

A merger between Apple and Disney isn’t just an idea that third parties are speculating about, as Bob Iger himself envisioned what a joint venture would look like in 2019.

“I believe that if Steve were still alive we would have combined our companies, or at least discussed the possibility very seriously,” Iger wrote The ride of a lifetime: Lessons from 15 years as CEO of The Walt Disney Company.

In many ways, Disney’s Bob Iger is the connective tissue.

Early on as CEO, he patched fences with Steve Jobs and Pixar.

After the acquisition, Jobs became Disney’s largest shareholder and board member.

Here are jobs at Disney (before the Pixar deal):pic.twitter.com/k0jXPDdy9P

— Jon Erlichman (@JonErlichman) April 2, 2023

Referring to the “connective tissue” between the two companies, Bloomberg’s Jon Erlichman wrote about the various crossover areas in a Twitter thread on Sunday. He pointed to Apple’s pledge to spend $1 billion on its theatrical release, Disney’s retreat into the Metaverse while Apple prepares to launch its own mixed reality product.

Under Iger’s rule, Disney has acquired companies like Pixar, Marvel, Lucasfilm, and 21st Century Fox — but it may be Disney’s turn to be acquired.

Apple, Inc. and The Walt Disney Company did not respond news week‘s requests for comments.

Current value of Apple and Disney

While Disney is an iconic brand and a hugely successful company, its size is dwarfed by Apple, Inc.

Apple is considered the largest technology company in the world by revenue. In 2022, its revenue was $394.3 billion and last month it was considered the largest company in the world by market cap with a price tag of $2.620 trillion.

For comparison, The Walt Disney Company had the 55th largest market cap as of March 2023, valued at $182.56 billion.

Although both companies are hugely successful, a merger would send profits skyrocketing, according to economist and consultant Christina Curtis.

“Given their complementary client footprints, the merger of these two powerful companies would likely result in significant growth,” said Curtis Leadership Consulting founder news week. “Based on the slight increase in the share price of both companies, investors appear to agree.”

Last week, both companies’ shares rose about 1 percent after Martin of Needham wrote to clients about a merger.

“It’s easy to imagine how they could seamlessly weave their technology and services together and garner more attention from consumers eager to be a part of the entertainment value that Apple and Disney are bringing,” Curtis said.

What’s stopping Apple and Disney from merging?

As Iger himself has hinted, the desire for a Disney-Apple merger has diminished since Jobs’ death in 2011.

As both companies entered the streaming wars, the two seemed further apart than ever. However, according to Beverly Hills financial attorney Chris Manderson, the two companies each have complementary qualities that could benefit each other.

“The thing that drives [mergers and acquisitions] is that it is easier to buy than to build. Disney is a major property owner, but its content will drive this merger. Apple has the platform and distribution, while Disney provides the content,” said Manderson, partner at Ervin Cohen & Jessup LLP news week.

While some see it as a match made in heaven, big business collaborations don’t always work out the way people hope. Manderson pointed out that AOL and Time Warner found synergies difficult.

“Disney has successfully combined many companies, but they were all in the entertainment industry,” he said. “Here they would be merging with what is essentially a hardware company. It’s hard to say if that would work. The reason most mergers fail is because they don’t integrate their cultures and their operations.”

He also warned that any attempt to merge with Apple would face legal resistance.

“Assuming Disney is the target, what happens with any takeover of a public company is the board of vendors gets sued for breach of fiduciary duty. There will always be allegations that they didn’t follow a proper sales process, that they’re selling the company too cheaply, and that they’re defrauding shareholders,” Manderson said.

“There will almost certainly be litigation with shareholders, but it is unlikely that this would put an end to a potential takeover. You can sue for an injunction to stop the acquisition, but in reality it will be a shakedown to get money out of the board. These lawsuits are almost always resolved, typically with a minor purchase price adjustment and a few additional SEC filings. “