Now that the Congress has passed US President Trump’s corporate tax cut, which would allow Apple to finally bring back its $252.3 billion foreign cash pile without a major tax hit, it will give the iPhone maker a much larger cash warchest to buy new companies. According to Citi analysts Jim Suva and Asiya Merchant, there’s a 40% likelihood of Apple using that money to acquire Netflix (via Business Insider).
While ranking potential Apple mergers and acquisitions (M&A) targets in a recent note to clients, Suva and Merchant marked Netflix as the company Apple would be most likely to buy. The analysts believe the Cupertino tech giant would need only one-third of its cash reserves to buy Netflix. The note was written before Disney’s acquisition of Fox’s studio and TV assets. But prior to that event, Citi gave an Apple-Disney tie-up a 20-30% chance.
“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.”
Activision and Electronic Arts are also among the potential M&A candidates, although the likelihood of Apple acquiring them is 10% or less.