30 September 2016

Walt Disney to acquire Twitter?

Since 2014, the prospect of Twitter being a possible takeover target for an even bigger company has been widely reported and discussed in the media. The social networking firm, whose shares have been trading on the New York Stock Exchange since 2013, has attracted potential suitors such as Microsoft, Apple and rival Facebook, as well as non-technology companies including News Corporation and Comcast Corporation. Perhaps most unexpectedly, Walt Disney this week became the latest company likely to make Twitter a takeover offer. The news came shortly after Salesforce.com also reportedly showed interest in bidding for the social media firm last week.

At first glance, Walt Disney and Twitter may seem like an odd match. But digging beneath the surface reveals opportunities that could benefit Walt Disney. Partly due to Facebook’s overwhelming dominance in the social media sphere, Twitter has consistently incurred net loss annually over the past few years. In search of other growth opportunities, Twitter has recently made a foray into video streaming. It won rights to live-stream sports events, such as National Football League, Major League Baseball and National Hockey League games. Twitter’s evolving business, Steve Symington of the Motley Fool reckons, could be advantageous to Walt Disney’s recent move towards video streaming.

According to Bloomberg, the Mickey Mouse creator is placing more focus on media technology as its cable television operation faces stiff competition from online media platforms. Last year, Walt Disney invested around USD 200 million in Vice Media, a digital media company. Similarly, in June this year it agreed to acquire a 33 per cent stake in MLB Advanced Media’s BAM Technologies, which broadcasts sports events online, for around USD 1,000 million. Walt Disney has also recently struck deals with Amazon and Netflix, allowing viewers to stream its content on the platforms.

Following the news, Walt Disney’s share price fell 1 per cent to USD 92 on 26th September. The Wall Street Journal reported that there may be potential competition between Walt Disney’s sports channel ESPN and Twitter’s streaming business if the deal goes through, which may have caused the slight unease among investors. However, Twitter’s technology could also benefit ESPN as viewers switch away from traditional television, the newspaper noted.

The possible Twitter takeover may provide an exit for all its private equity backers, including JP Morgan, Spark Capital Partners and Rizvi Traverse Management. The target can be valued at around USD 16,009 million, based on Twitter’s close of USD 23 on 22nd September, the last trading day before news of Walt Disney’s potential bid was first reported. If an offer materialises by the end of December, the acquisition could turn out to be the eighth largest announced this year, based on data compiled by Zephyr, the M&A database published by Bureau van Dijk.

© Zephyr