[Barrons] Apple’s Next Big Move? It Should Buy Nintendo

Oct 25, 2017
219
In general Japanese law makes hostile takeovers very difficult. Nintendo would have to want to sell.
This isn't really the case; there are more corporate structure/cultural impediments than legal ones, ones which Apple, if anyone, could be able to overcome (if only by dint of having infinite money and resources).

https://link.springer.com/article/10.1007/s40804-017-0091-1#Sec20
"The perceived low level of activity in the Japanese takeover market cannot be attributed to its takeover law, the Financial Instrument or the Exchange Law. Indeed, a careful examination of the content of the law reveals that this legislation operates in the offeror’s favour. "

https://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?article=1122&context=bblj
"Ultimately, by highlighting how Japan’s hostile takeovers regime must be understood on its own terms, this part of the article reveals that Japan’s regulatory regime has charted its own course—but in a way that has been slow to develop and left many critical questions unanswered. For example, it is still unclear, under Japanese law, what types of defensive measures are legally permissible, how directors’ duties apply in hostile takeover cases, and whether independent directors have any role to play in hostile takeovers. We posit that such critical questions have remained unanswered in Japan because other non-legal factors described in this Article (i.e., stableshareholdings and Japanese corporate culture) have effectively shielded the vast majority of listed companies from hostile takeovers."

https://www8.gsb.columbia.edu/articles/chazen-global-insights/why-ma-different-japan
"Although most legal hurdles to M&A have been lowered and transparency is much improved, the Japanese corporate governance norms still protect companies that balk at selling to international investors or hostile buyers"
 
Oct 25, 2017
131
Some examples of foreign coumpanies buying into Japan companies, Foxconn bought Sharp. Renault has a large stake in Nissan. If an outright purchase is not preferable, Apple can buy a large equity stake as a part of a strategic partnership too.
 
Oct 30, 2017
1,260
Canada
Regarding a totally theoretical hostile takeover that had no barriers except money:

By my calculation, as of last September, Nintendo had (at least) enough money in the bank to increase their own stock holdings from 15.21% to 23.68%, if the stock was at the all-time-high price of 70,500 yen per share. As big hostile takeovers are usually gradual, they could likely buy a lot more stock than that as the price slowly rises. If they somehow still couldn't get enough, they could probably find some generous Japanese banks/companies/individuals willing to help them out, or as a last resort, raise cash by selling off some IP (their 1/3rd stake in Pokémon alone would be some chunk of change), or even buildings.

All that could leave them poor, but still standing.
 
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Oct 25, 2017
635
Canada
That way Nintendo could probably have a competent online infrastructure. I wouldn't mind if Nintendo kept doing what they're doing regarding games and their systems don't become $800+ devices.
Apple's iCloud is hosted on Google Cloud, which is also what Nintendo uses to host NSO. They're using the exact same infrastructure right now.
 
Oct 25, 2017
131
Finally, instead of making games that play on their own boxes they can... make games that play on someone else's boxes. epic
Would you be interested in a subscription service from Apple that offers Nintendo games from NES, SNES and Switch? I touch upon that too in the column.
 
Oct 25, 2017
219
I truly believe Apple purchasing or entering a strategic partnership with Nintendo would be a great move for Apple. Nintendo is extremely profitable and has some of best sustainable game franchises that can be monetized for future services offerings.

Compared to other potential targets, Nintendo is also reasonably priced.

Disclosure: I wrote the column in OP.
Considering Apple isn't in the game publishing space and has shown no inclination to go there (and their recent acquisition trends are nowhere close), and Nintendo has had both hits and misses on mobile but are vastly more well known for their non mobile work, why would this be a synergistic acquisition? Why would Apple do this beyond "the price could work, people like Nintendo games, and their cultures are outwardly somewhat similar"? In my experience, that's not even *close* to enough reasoning for a $40B buy in.
 
Oct 25, 2017
131
Considering Apple isn't in the game publishing space and has shown no inclination to go there (and their recent acquisition trends are nowhere close), and Nintendo has had both hits and misses on mobile but are vastly more well known for their non mobile work, why would this be a synergistic acquisition? Why would Apple do this beyond "the price could work, people like Nintendo games, and their cultures are outwardly somewhat similar"? In my experience, that's not even *close* to enough reasoning for a $40B buy in.
Morgan Stanley estimates 70% of spending in Apple's App Store is game-related.

Nintendo offering capabilities and assets Apple does not currently have, is the whole point why a deal would make sense for Apple.
 
Feb 28, 2018
1,380
Even if Nintendo was in the position where they want to sell, there is little incentive for Apple to shell out for Nintendo - what can Nintendo offer them as a subsidiary that they can't offer now? Nintendo has already had exclusive deals with Apple like Super Mario Run.

The only thing I can think of is Apple entering the Console market aggressively and using Nintendo's foothold and expertise in the industry to their advantage, but that sounds like a bad idea.

The only company I can think of that would have a lot to gain from a Nintendo purchase (this isn't happening but it's fun to speculate) is Disney, who could turn Nintendo into one of their media arms like Marvel and Star Wars. Nintendo is arguably only second to Disney in terms of having IP's and characters known and loved worldwide. Mario and Pikachu are like, Mickey Mouse-tier. The theme parks, TV shows, movies, games etc. that Disney would get out of this purchase is staggering, so I'm sure they're closely monitoring Nintendo in case they ever go under somehow.

But yeah this ain't happening. Nintendo is a huge corporation with a lot of revenue streams and they're doing very well right now with both their Software and Hardware offerings, so this is all hypothetical.
 
Oct 25, 2017
219
Morgan Stanley estimates 70% of spending in Apple's App Store is game-related.

Nintendo offering capabilities and assets Apple does not currently have, is the whole point why a deal would make sense for Apple.
I know - I read the article. I don't doubt that there is a lot of spending on the App Store for games, but that doesn't mean that it's a sector that Apple wants to get into. They don't do games publishing, and despite having one the most active marketplaces for mobile games sales, an active M&A process, and tons of money, they haven't made even the slightest of moves to break in. Just because a company is profitable, has assets, and it's an active sector of the market doesn't make it a good acquisition idea.
 
Jan 10, 2019
39
I know this is never happening but lets speculate what would happen if it did. For example does Apple have a history with big acquisitions like this and if what has happend after them? How much independence would Nintendo have for example?
 
Oct 25, 2017
131
I know - I read the article. I don't doubt that there is a lot of spending on the App Store for games, but that doesn't mean that it's a sector that Apple wants to get into. They don't do games publishing, and despite having one the most active marketplaces for mobile games sales, an active M&A process, and tons of money, they haven't made even the slightest of moves to break in.
One of the things we have been writing about is the need for Apple to add for subscription service offerings to get its stock valuation higher.

Investors like the recurring revenue characteristics of service subscriptions and pay higher earnings multiples for them.

Nintendo content would be a great games subscription services offering for Apple.
 
Oct 25, 2017
131
I know this is never happening but lets speculate what would happen if it did. For example does Apple have a history with big acquisitions like this and if what has happend after them? How much independence would Nintendo have for example?
Apple does not have a history of mega deals like this, but has repeatedly said they are open to large acquisitions if it adds value to its customers.
 
Oct 25, 2017
219
One of the things we have been writing about is the need for Apple to add for subscription service offerings to get its stock valuation higher.

Investors like the recurring revenue characteristics of service subscriptions and pay higher earnings multiples for them.

Nintendo content would be a great games subscription services offering for Apple.
SaaS is a broad area of applicability, much moreso than just games, and other things fit better with what Apple already has. Nintendo has games, sure, but again, they've had plenty of misses on mobile, and don't really have much for subscriptions. They *could*, but they don't now, and that's a big realignment to just say "Ok, now Nintendo makes subscription games". Plus, there aren't *that* many sub services for games in the first place. More MTX, which is recurring revenue sure, but also...that still doesn't convince me that this makes sense.
 
Oct 25, 2017
131
SaaS is a broad area of applicability, much moreso than just games, and other things fit better with what Apple already has. Nintendo has games, sure, but again, they've had plenty of misses on mobile, and don't really have much for subscriptions. They *could*, but they don't now, and that's a big realignment to just say "Ok, now Nintendo makes subscription games". Plus, there aren't *that* many sub services for games in the first place. More MTX, which is recurring revenue sure, but also...that still doesn't convince me that this makes sense.
I wasn't really saying subscription games like that, more a subscription service like PS Plus or Xbox Live or a Netflix type offering but filled with Nintendo console game content.

I would buy that. Personally not the biggest fan of mobile game MTX type stuff, but yes that would be another opportunity.

We'll see how well Mario Kart does after the somewhat disappointing Super Mario Run.
 
Oct 27, 2017
867
This man or product/company sickens me to the core. For being incredibly stupid by assuming Nintendo would be something you can buy and also for suggesting a multi-billion greed company that loves to rip off its customers should be the one.

At that point you could also suggest EA to buy Nintendo...
Who’s ripping whom?

However, Apple doesn’t need Nintendo. They don’t fit together and Apple is not someone who is buying conservative old IPs.
 
Oct 25, 2017
219
I wasn't really saying subscription games like that, more a subscription service like PS Plus or Xbox Live or a Netflix type offering but filled with Nintendo console game content.

I would buy that. Personally not the biggest fan of mobile game MTX type stuff, but yes that would be another opportunity.

We'll see how well Mario Kart does after the somewhat disappointing Super Mario Run.
But that's getting into the publishing space, which again I don't know why Apple would get into. Publishing and hardware, which of course Apple does, but they'd release a dedicated game thing for the Switch 2? I don't see that, not with their current trend either internally or with their acquisitions. So far I'm not seeing a reason beyond that Nintendo has the potential for a degree of recurring revenue - something they're not really doing now - but the same could be said for other, far more compatible companies.
 
Dec 13, 2017
676
Even if Nintendo was in the position where they want to sell, there is little incentive for Apple to shell out for Nintendo - what can Nintendo offer them as a subsidiary that they can't offer now? Nintendo has already had exclusive deals with Apple like Super Mario Run.

The only thing I can think of is Apple entering the Console market aggressively and using Nintendo's foothold and expertise in the industry to their advantage, but that sounds like a bad idea.

The only company I can think of that would have a lot to gain from a Nintendo purchase (this isn't happening but it's fun to speculate) is Disney, who could turn Nintendo into one of their media arms like Marvel and Star Wars. Nintendo is arguably only second to Disney in terms of having IP's and characters known and loved worldwide. Mario and Pikachu are like, Mickey Mouse-tier. The theme parks, TV shows, movies, games etc. that Disney would get out of this purchase is staggering, so I'm sure they're closely monitoring Nintendo in case they ever go under somehow.

But yeah this ain't happening. Nintendo is a huge corporation with a lot of revenue streams and they're doing very well right now with both their Software and Hardware offerings, so this is all hypothetical.
Apple wouldnt enter the console market, the games would run on ios devices. Lots of kids have iphones nowadays. Isn't nintendo worth like $40B? The tax hit to repatriate apples offshore cash pile is like $38B, which commentators have characterized as a drop in the bucket. Doesn't seem like far fetched idea imo, apple did buy beats after all.
 
Oct 27, 2017
1,367
Nintendo has struggled to gain traction beyond its home consoles.
Is "struggle" the right word for something you haven't really put effort into? They've "struggled" in the movie and merchadise businesses, too, then, since those aren't where their focus is.

And like everyone else has said, they're not for sale.
 

Matt

The terror that flaps in the night
Moderator
Oct 24, 2017
1,781
Would actually make a fair bit of sense for Apple, though as is usually the case, industry consolidation isn’t a good thing.
 
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JayBee

Alt-account
Member
Dec 6, 2018
1,332
Seems like a move that's considered because it would benefit apple's financial needs that are kind of slipping right now. Like there's no good reason for it except for apple's financial goals which isn't worth it at all
 
Feb 28, 2018
1,380
Apple wouldnt enter the console market, the games would run on ios devices. Lots of kids have iphones nowadays. Isn't nintendo worth like $40B? The tax hit to repatriate apples offshore cash pile is like $38B, which commentators have characterized as a drop in the bucket. Doesn't seem like far fetched idea imo, apple did buy beats after all.
That would be a great way of devaluing Nintendo's IP's and alienating the couple dozen millions of diehard Nintendo fans.
 
Oct 26, 2017
1,530
Sony might be a better, albeit more expensive, buy for Apple. Music, movie and game content under one roof.

(That is, if Apple wants or needs content of their own. Some analysts would say they do.)
 
Oct 25, 2017
6,124
Except this article makes a coherent argument, because it correctly identifies a key asset of Nintendo (character equity) that synergizes well with Disney, and could be exploited for increased value with more capital put behind it. Whereas the article in the OP literally suggests Nintendo and Apple are a good fit because...they both dislike spending money???

Disney is the event horizon. No one should want to be there at the point of no return.
But at the event horizon, time and space switch places. You can travel infinitely across space, while being locked in the same moment of time. Doesn't that sound interesting?
I don't want Ninty to be bought out by anyone, lol. I just think it'd make more sense than Apple, of all firms.