According to Citi analysts Asiya Merchant and Jim Suva, there is a 40% chance of Apple taking over Netflix, as the corporate tax cut is passed by US President Trump’s government. Under this cash cut, Apple will have the opportunity to repatriate about $220 million in cash and it needs one-third of the amount to acquire Netflix.
Along with the cut, the companies are allowed once repatriate cash that is stored overseas and that too without any major tax hit. On the other hand, Apple already has about $252 billion in cash, mostly in foreign jurisdictions. Adding the two scenarios, Apple will have enough cash to acquire new companies.
Merchant and Suva came up with a predictive note for the clients which they have sent in December. Besides the likes of Tesla, Disney, and Electronic Arts, the M&A targets of Apple include Netflix sitting on 40% probability, the highest in the graph.
Just after the note was written, Disney acquired the studio and television assets of Fox. Prior to this, Citi already gave a 20-30% chance of an Apple-Disney. In case that happens for real, it would be a big bang among the recent M&A ventures in the industry. Although there’s no such indication as of now.
Apple has been trying to get hold of providing a compelling television or movie service for years now. Its iTunes, though a massive hit initially but soon the likes of Netflix, Hulu, and Amazon have gained more viewers.
Fuelling the scenarios are two big Hollywood names such as Reese Witherspoon and Jennifer Aniston who will feature in the first scripted video series of Apple. Now, making iPhones and television series are two different things, which further strengthens Apple’s owning of Netflix.
Merchant and Suva said to the clients that Apple has “too much cash – nearly $250 billion – growing at $50 billion a year. This is a good problem to have. 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.”
Well, this sums up for the possibility of two big brands from two exclusive industries of today’s world. It isn’t hard to find House Of Cards fans using iPhones, and neither it is likely going to be hard for Apple to enjoy a broader viewer base from Netflix. It might just turn out to be a ‘merge made in heaven’ for the tech giant!
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