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May 5, 2017

Is Apple looking to acquire Disney, Tesla, or Netflix?

Apple may have around $220bn cash to spend according to Citigroup.

By James Nunns

Cash rich Apple could have around $220bn to splash on the likes of Netflix, Walt Disney, and Tesla.

That’s according to Citigroup which listed seven companies as potential takeover targets for the iPhone manufacturer.

The reason for this potential shopping spree is because Apple has over 90% of its cash sitting overseas and President Trump’s tax blueprint proposes that a multinational can bring in profits overseas at a tax rate of just 10%, rather than the standard 35%.

This would mean that Apple’s $250bn overseas would still be $220bn when brought back.

Citigroup analyst Jim Suva said in a note to clients: “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,” according to Reuters.

In addition to the likes of Netflix and Disney, Apple could also choose from the likes of Activision Blizzard, Electronic Arts, Take Two Software, and Hulu.

Read more: Biggest tech acquisition rumours in 2017

The companies were chosen due to fitting five criteria – strategic fit, global scale, transaction size, few non-strategic assets, and likely to impact on Apple’s share price.

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Anne de Kerckhove, CEO of Iron said: “With over 90 per cent of Apple’s cash sitting overseas, clearly acquisition activity is on the cards.
“Tesla and Netflix are rumoured as the favourites but if this is the case, what does it really tell us about Apple’s investment strategy? Obviously, buying up companies that pose a threat to Apple’s constantly diversifying product line could, the tech giant will hope, neutralise the competition and pave the way for a smoother exploration into other technologies.
“But Apple needs to consider companies that don’t have a billion dollar plus price tag. The cash might be there, but they need to look at longevity rather than simply current tech trends. What will their customers in 10, 20, 30 years want and need from them?”

Analysts at RBC recently mused about the potential for Apple to acquire Disney but gave it a greater than 0% probability.

However, if Apple were to buy Disney then it would create a media/tech juggernaut that would dominate numerous markets.

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