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Disney at Center of Rumored Takeover Talks

Shares of Walt Disney Co. traded up and down the first week of July amid reports that Verizon Wireless may consider purchasing the Burbank entertainment conglomerate. The speculation stemmed from an article published by the New York Post the weekend prior. “One rumor making the rounds last week was that Verizon may be eyeing a Disney purchase,” the Post reported. “While that sounds fantastical, a well-placed banker told On the Money not to count Verizon out.” However, the Post’s article drew skepticism from analysts. Barron’s reported that a Wells Fargo Co. media analyst “flat out rejected the possibility,” and another analyst from RBC Capital Markets advised its readers to “assign the Post’s report a low probability.” Rumors around Disney joining forces with another high-profile company seems to be a trend on Wall Street this year. In January, some investors were making a case for Disney’s purchase of Netflix Inc. For example, Mark Hughes, a contributor to Forbes magazine argued that “all signs point toward the advisability of a couple of new big moves by Disney to further expand their holdings.” Hughes also commented that Disney needed to find a way to fix “ESPN from a slide that continues to be the one small drag on the company’s stock and performance.” The theory prompted mixed reactions from analysts, despite no real reports that Disney nor Netflix were contemplating a deal. In April, another rumor proposed that Apple Inc. could purchase Disney, and create a company worth $1 trillion. This was part of larger speculation around Apple which started last fall when Chief Executive Tim Cooke told analysts that the company was “open to acquisition of any size.” With a market cap of $644 billion, Apple would have a lot of options. And even though Disney is a large conglomerate in itself – with a market cap of about $168 billion – Cooke told analysts that original content would be a “great opportunity” for the company, fueling rumors that the company may be considering Disney among others. Disney shares rose 1.1 percent on July 3, the first trading day after the Post’s Verizon story. But by July 5 the price slumped to $105.63. Verizon, on the other hand, has shown more action than speculation this year. Just last month, the telecommunications giant closed the $4.5 billion acquisition of Yahoo Inc., which it will combine with assets from AOL to create a new subsidiary called Oath. The subsidiary will include “more than 50 media and technology brands that engages more than a billion people around the world,” Verizon said in a statement. As for size, Verizon has a market cap of $184 billion, just slightly larger than Disney.

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