There's A Strong Chance That Apple Will Buy Netflix, Citi Analysts Say
Could there be another acquisition that could shake Hollywood as much as the historic Disney-Fox deal did? With the rumblings around Apple approaching a deal with Netflix, it's possible.
The streaming giant has heavily impacted and diversified the television field, and Apple may be looking to get its hands in that pot — recently setting a $1 billion budget to produce its own original content. Analysts claim that Apple, in possession of a surplus of overseas cash, will approach Netflix for a deal.
Citi analysts claim that there's a 40% chance that Apple will acquire Netflix, due to the $252 billion in overseas funds that the company has available to repatriate, according to Business Insider.
Apple was previously unable to bring its foreign earnings back to the U.S. due to federal tax law, but President Trump's newly passed corporate tax cut offers companies a one-time allowance for companies to repatriate cash stored overseas without a major tax hit, Business Insider reports. Essentially, Apple has a whole lot of money that they need to spend.
With this new information at hand, Citi analysts have come to the conclusion that Apple is likely to buy Netflix, which would only take out one-third of its available cash on hand. Citi analystsJim Suva and Asiya Merchant told clients:
"The firm 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."
However, this prediction should come with a huge grain of salt: namely, that this is all on the words of analysts who, as Forbes says, "have nothing to lose." Forbes reporter Karl Kaufman argues that there is good reason to doubt this analyst prediction, writing, "Apple has already committed $1 billion towards creating new shows and their largest acquisition was buying Beats for $3 billion in 2014. Why would they spend $75 billion to buy Netflix? It would be a desperation move that would raise a white flag and signal a major organizational shift in philosophy."
So take this news as you will. It should be noted that neither Apple nor Netflix have made any mention of a deal, or have there been any previous reports of talks between the two companies. The closest the two companies have been mentioned in proximity to each other is Apple's steady moves to launch its own streaming service to rival Netflix and invest in original programming.