Summary
- 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.
- Iger's return to Disney was seen as a big deal, but the company's stock has declined and its current earnings are significantly lower than their peak in 2018.
- While potential acquisitions like Electronic Arts have been discussed, Iger's response has been non-committal, and buying a company like EA would be challenging and likely require significant funding.
Some senior Disney executives are pushing for the company to launch a serious foray into the gaming space by acquiring at least one major developer-publisher, according to a newly surfaced report. However, none have yet manage to sell the idea to CEO Bob Iger following his return to Disney in November 2022.
Iger first stepped down as the CEO of Disney in February 2020, spending another 18 months in the largely advisory role of executive chairman before announcing his retirement. But with the company's stock down over 30% since his departure, Iger's 2022 return to Disney was lauded as a huge deal for the entertainment giant. Nevertheless, the industry veteran has so far struggled to recapture the magic from his initial 15-year stint at the conglomerate, whose current earnings are almost two-thirds of the way down from their 2018 peak, when they surpassed $15 billion.
Iger has repeatedly been pitched the idea of bolstering the company's revenue streams with gaming acquisitions since returning to Disney, Bloomberg reports, citing insiders familiar with the matter. One particular potential acquisition target that was brought up by his deputies was Electronic Arts, as per the same source. Those ideas were possibly emboldened by the recent reports of EA being in the market for a buyer or merger, which emerged online shortly before Iger's return to Disney.
The CEO has yet to give any indication of being on board with a big gaming bet the size of EA, with Bloomberg's sources characterizing his response to such pitches as non-committal. Even if that wasn't the case, buying one of the largest game companies on the planet would not be a straightforward task for Disney. EA's current market cap is close to $35 billion, so its hypothetical buyout price would likely have to go beyond that figure even if the company was open to a sale. For reference, Microsoft's blockbuster acquisition of Activision Blizzard was agreed at $95 per share, roughly $30 more than what the Call of Duty maker's stock opened at on January 14, 2022, the last trading day before the deal's announcement.
Even with that all-cash and stock deal now verging on completion, Microsoft will still have plenty of liquidity left, with its June 2023 cash reserves being in the ballpark of $111 billion. In contrast, Disney's stockpile at the start of the last quarter was about 10% of that figure, meaning that the only way the company could fund a major gaming acquisition the size of EA anytime soon would be through debt. As of June, Disney's outstanding debt already stood at $47.18 billion, nearly one-third of the entertainment giant's total market cap.
Whether that state of the company's balance sheet is at the root of Iger's reservations about the idea of gaming acquisitions is unclear. However, that cautiousness dovetails with Iger's late 2022 claim that Disney has no plans to acquire more assets.
Source: Bloomberg