It’s been mergers and acquisitions season in the US over the last year or two. Sprint and T-Mobile are once again flirting over a potential tie-up. AT&T is in the process of buying Time Warner for a whopping $85 billion. And Verizon has just sealed the takeover of Yahoo for $.4 billion.
Inevitably, all of this movement sets the rumour-mill turning, and the latest deal being discussed is one that would dwarf even the AT&T/Time Warner deal. Reports from the US claim Verizon, the country’s biggest wireless operator, is eyeing up a deal to buy media giant Disney.
The rumour stems from a report in the New York Post, who cited an unnamed banker as saying Verizon could be interested in a tie-up.
For the numbers, any deal would be huge. Disney has a current market capitalisation of around $168 billion – just short of Verizon’s own market cap of $184 billion. If the two were combined. That would potentially put Verizon within the top 10 companies by market cap in the world.
Of course, the rumours are all based upon this single report which, according to the NY Post, comes from a single source in banking, and even then, it was a report of interest from the telco.
So what rings true about it? For one thing, the fact that Verizon needs more content if it is to compete directly with big rival AT&T. The Time warner deal will give the latter control of some huge content assets, including TV channel HBO, which owns the rights to hugely popular TV shows such as “Game of Thrones”, “Westworld” and “True Detective”. It will also own Turner Broadcasting System, which airs a lot of US sports; news service CNN; and Warner Brothers studios.
To put it another way, should the AT&T deal be approved, it would transform the company from being a telecoms operator, into being a global content provider.
Verizon will no longer be direct competition, should the deal be given the thumbs up, because, at least on a content level, it would have nowhere near the same level of offering. Sure, it will still compete on telecoms packages, but if you’re being offered a significant money off a subscription content service like HBO to bundle in with your mobile and fixed tariff, then there is a real opportunity.
Disney is an even bigger content firm than Time Warner, and it is one of the world’s best known brands. It too has a huge TV operation, a hugely successful movie studio, along with a massive retail platform, a music division, software firm and its own range of theme parks.
Due to a lack of detail, it is unclear if all of this is in Verizon’s sights, or if it would seek to buy just part of The Walt Disney company. But the idea of having access to all of this content carries a clear appeal for Verizon, especially when it is facing a huge transformation in its nearest rival.
Taking the Micky
As I mentioned earlier, the rumour is tenuous, to say the least. Disney say a 2% in its stock valuation following the original report, but analysts have not been so friendly.
RBC Capital’s media analyst Steve Cahall cast doubt on the veracity of the report in a note to clients. He is quoted as saying: “Yesterday the NY Post reported that a "well-placed banker" said not to count Verizon out of a potential bid for Disney.
“Though not fake news, we think the Post's burden of legitimacy for publishing such ideas is below that of publications like the WSJ, Reuters and Bloomberg. But to its credit, we note that it occasionally gets these M&A calls right.”
Wells Fargo media analyst Marci Ryvicker was equally dismissive: “When we saw this latest ‘news’ of Verizon looking to buy Disney, we laughed. Out loud. In fact, we’re still laughing,” she wrote in a note to clients Monday afternoon.
“What would a wireless juggernaut want with a theme park, a YUGE consumer products line and the various movie studios?”
Though analysts have been wrong before, this does have the faint whiff of being too spectacular a deal to have any substance. Still, Verizon may seek more acquisitions on the content front soon as it looks to compete with AT&T. It is more