Disney's Bold Move: Unveiling Plans for Major Gaming Acquisitions
Disney executives are reportedly eager to make a major gaming acquisition, according to a recent report Multiple high-ranking officials are said to be pushing for a blockbuster deal in the gaming industry
Highlights
Senior Disney executives are reportedly pushing for the company to enter the gaming space by acquiring a major developer-publisher, but CEO Bob Iger has not yet been convinced.
The return of Iger to Disney was highly anticipated, however, the company's stock has experienced a decline and its present earnings are considerably lower compared to their peak in 2018.
Despite talks about potential acquisitions such as Electronic Arts, Iger has remained non-committal in his response. Acquiring a company like EA would pose challenges and would likely necessitate a substantial amount of funding.
According to a recent report, some senior Disney executives are advocating for the company to enter the gaming industry by acquiring a major developer-publisher. However, the idea has not yet been approved by CEO Bob Iger since his return to Disney in November 2022.
Iger previously served as Disney's CEO until February 2020 and remained in an advisory role as executive chairman for 18 months before retiring. His return to Disney in 2022 was seen as a significant move for the company, which has experienced a stock decline of over 30% since his departure. Despite this, Iger has faced challenges in replicating the success of his initial 15-year tenure, with current earnings dropping significantly from their peak of over $15 billion in 2018.
Iger has been approached multiple times about the possibility of expanding Disney's revenue streams through gaming acquisitions, according to insiders cited by Bloomberg. One specific acquisition target that was suggested by his team was Electronic Arts, as reported by the same source. These proposals may have been influenced by recent rumors of EA seeking a buyer or potential merger, which surfaced online shortly before Iger rejoined Disney.
The CEO has not shown any signs of supporting a large gaming investment like EA, and according to Bloomberg's sources, his response to such proposals has been non-committal. Even if that were not the case, acquiring one of the biggest game companies in the world would not be a simple task for Disney. Currently, EA's market capitalization is around $35 billion, so even if the company was willing to be sold, the buyout price would likely need to exceed that amount. As a point of reference, Microsoft's acquisition of Activision Blizzard was agreed upon at $95 per share, which was approximately $30 more than the stock's opening price on January 14, 2022, the last trading day before the announcement of the deal.
Despite the fact that the all-cash and stock acquisition by Microsoft is nearing completion, the company will still have a significant amount of available funds. As of June 2023, their cash reserves are estimated to be around $111 billion. In contrast, Disney's cash reserves at the beginning of the last quarter were only about 10% of that amount. This means that if Disney were to pursue a major gaming acquisition on the scale of EA in the near future, they would have to rely on debt. As of June, Disney already had outstanding debt of $47.18 billion, which is nearly one-third of the company's total market capitalization.
It is unclear if the state of the company's balance sheet is the reason for Iger's concerns regarding gaming acquisitions. Nevertheless, Iger's caution aligns with his statement in late 2022 that Disney has no intention of acquiring additional assets.
