An Apple ‘Mega-Merger’ Not Likely in the Near Future: UBS

Citigroup listed seven companies as potential takeover targets for Apple, including Netflix, Walt Disney and Tesla, as a way to put its cash hoard of more than $250 billion to work. However, according to a note from analysts at UBS reported by Business Insider, the probability of Apple making a “mega-merger” in the near future is low.

With a market cap of $823 billion USD, Apple is one of the world’s most valuable companies. That means it has more money to splash on large acquisitions than most — more than $250 billion USD to be precise. Many would expect Apple to use that cash for potential takeover targets, but that just may not be the case.

“Our view is that the probability of mega-mergers is low as it should be,” wrote UBS analysts Steven Milunovich and Benjamin Wilson. “[Tim] Cook has said he is not averse to a large deal, but we think it would need to leapfrog Apple ahead in an area of interest, such as transportation, A/R, health, home automation, and perhaps content.”

In a recent note to clients, Citigroup analyst Jim Suva named Tesla as a possible acquisition target for Apple, if the company does in fact repatriate the near $250 billion USD that the company has stashed overseas. Citigroup also named Netflix and Walt Disney as possible targets for acquisition.

The note to investors was sent out as a result of US President Donald Trump’s previously revealed proposals to allow multinational corporations to bring back profits that have been stashed around the world in various tax havens at a tax rate of only 10%, versus 35% as it stands now.

The note read: “Since one of the new administration’s top priorities is to allow US companies to repatriate overseas cash at a lower tax rate, Apple may have a more acute need to put this cash to use.”

Under pressure from shareholders to hand over more of its cash hoard, Apple recently boosted its capital return program by $50 billion USD, increased its share buyback program by $35 billion USD, and raised its quarterly dividend by 10.5 per cent.