Citi Analysts: There is a 40% Chance Apple Will Use Cash War Chest to Acquire Netflix
Might Apple use some of that $252 billion in offshore cash that it could bring home under President Trump’s new corporate tax laws to buy other companies? Such as, oh, let’s say… Netflix? Citi analysts Jim Suva and Asiya Merchant says there’s a chance it could happen.
The cut in corporate taxes, along with a one-time allowance for companies to repatriate cash stored overseas without a major tax hit, will give Apple a much larger cash warchest to buy new companies. Apple has about $252 billion in cash, much of it in foreign jurisdictions, which previously it was unable to bring back to the US.
Suva and Merchant ranked potential Apple M&A targets in a note to clients sent in December. They mark Netflix as the company Apple would be most likely to buy.
The note was issued before Disney’s grab of Fox’s movie and television assets.
Apple has been making moves to get into video production, as it was recently announced that Apple’s first scripted series will star Reese Witherspoon and Jennifer Anniston.
However, Apple has found the process of producing series to be much different from any other projects the company has been involved in. So, grabbing a company – such as Netflix – that knows the ins-and-outs of video production quite attractive.
“The firm has too much cash – nearly $250 billion – growing at $50 billion a year. This is a good problem to have,” Suva and Merchant told clients. “Historically, Apple has avoided repatriating cash to the US to avoid high taxation. As such, tax reform may allow Apple to put this cash to use. With over 90% of its cash sitting overseas, a one-time 10% repatriation tax would give Apple $220 billion for M&A or buybacks.”
The pair say that Apple would need only a third of that cash cache to buy Netflix. What do you think? This all sounds a bit far fetched to us here at MacTrast, but stranger things have happened. Tell us what you think of the possibility in the comments section below.