RBC Capital Markets told investors a mega-merger of Apple and Disney, though unlikely, would make sense strategically for the iPhone maker.



"We have seen increased discussions among investors regarding 'How could AAPL gain scale in media/content and what could it do with potential cash repatriation?" analyst Amit Daryanani wrote in a note to clients Thursday.

"We see a confluence of events that make an acquisition of DIS a 'greater than 0 percent' probability event (while odds are low). AAPL's focus on services and its inability (so far) to replicate its music/iTunes strategy into content/media make acquiring DIS logical in our view."



Daryanani cited Apple CEO Tim Cook's comments that "deal size isn't a negating factor" for its future mergers and acquisitions.

In addition, the analyst noted the Republican tax repatriation holiday proposals, where corporations can bring home overseas earnings at a lower tax rate. If this tax reform becomes law, the iPhone maker will have access to its more than $200 billion held abroad for acquisitions, he said.



Daryanani gave six reasons why Apple may buy Disney:

"Accelerates AAPL's push into services and content." "Instantly leapfrogs Netflix, Amazon, and YouTube in content and resets the lead with content narrative." "AAPL has been unable to replicate its music playbook to video." "Iconic brand — there are few brands that AAPL could acquire that wouldn't dilute its iconic presence and customer relationships; DIS would clearly strengthen (and not dilute) the brand value." "Even using minimal cost synergy, we see the deal being accretive by 15-20 percent." "AAPL has been increasingly looking at larger deals and noted that services is a focus."

RBC Capital reiterated its buy rating and $155 price target for Apple, representing 9 percent upside from Wednesday's close.