Verizon is considering buying Disney, as shares of Disney pop just ahead of the closing bell.
Speculation that Verizon (VZ) boss Lowell McAdam has interest in buying Disney (DIS) has resurfaced, ahead of Allen & Co.’s annual Sun Valley meeting of media and tech titans.
The acquisition would give Verizon hit films from the Star Wars, Cars, Pirates of the Caribbean and X-Men franchises that it could stream to mobile users, at a time when brutal competition has carriers searching for ways to differentiate their services. However, the deal would involve massive debt at a time when Verizon is trying to pare down its balance sheet.
Walt Disney Co. stock gained 1.5% to $107.80 after the New York Post reported on Verizon’s interest on buying the media and theme park group. Verizon Communications Inc. rose 0.7% to $44.99.
Anticipation that Verizon would make a major media acquisition arose after rival AT&T Inc. (T) said in October that it would buy Time Warner Inc. (TWX) for $85.4 billion, or $108.7 billion when including assumed debt.
By acquiring Disney, Verizon would get plenty of movies and TV shows to stream over its go90 wireless video app. Disney’s portfolio includes its namesake studio, Pixar, Marvel and Lusasfilm, as well as ESPN, ABC and other networks.
Verizon would also become a theme park operator, with such far-flung properties as Shanghai Disney Resort, Disneyland Paris, Florida’s Epcot and the original Disneyland in California. The telecom would own merchandising, gaming and publishing businesses as well.
Those anxious for a deal should keep in mind, however, that Verizon is still chipping away at the $130 billion in debt that it took on in its deal to buy Vodafone Group Plc’s minority stake in Verizon Wireless, which closed in 2014.
As a result, buying the Magic Kingdom would cause Verizon’s already-hefty $112 billion debt load to balloon even further. Disney has a $169 billion market cap, and would have a full price tag of $190 billion including its debt.
Verizon’s deals since the Vodafone transaction have been modest, relative to its $183 billion market cap. The New York telecom has purchased the Internet operations of Yahoo! for $4.48 billion and wireless spectrum holding company Straight Path Communications Inc. (STRP) for $3.1 billion.
Verizon declined to comment regarding New York Post story. Disney did not immediately respond to a query.
Verizon Chairman and CEO Lowell McAdam opened the possibility of a mega deal back in April when he told Bloomberg that he would engage Disney, Comcast (CMCSA) or CBS (CBS) in deal talks, were they to approach the telecom.
CFO Matthew Ellis later said the McAdam’s remarks were “a little taken out of context” . “He was answering the question about if somebody called, would we take the call and would we have a conversation with them,” Ellis said on Verizon’s first quarter earnings call in April. “Of course we would. But we’re also very confident with the assets we have and the plans we have of developing the business in an organic fashion as well and generating shareholder value.”
Ellis hedged on whether Verizon would make a massive bet if the right opportunity arose. “We believe in a strong balance sheet, but if the right acquisition comes along that allows us to add shareholder value in the long run and is the right thing for shareholders and all stakeholders in our business, we’d look at doing that,” he said.
Allen & Co’s big conference in Sun Valley would be an ideal venue for McAdam and Disney boss Bob Iger to hash out the opportunity. McAdam is scheduled to attend, though Disney did not respond to a query about Iger’s attendance.
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