“As telecommunications giants continue scooping up content plays in an effort to take over more of the value chain while fending off being relegated to dumb pipes, content companies are seeing themselves enjoy premium valuations,” Evan Niu writes for The Motley Fool. “The biggest and most recent example is AT&T’s current pending acquisition of Time Warner, a massive $85.4 billion deal that was announced less than two weeks ago.”
“Ahead of that announcement, there were reports that Apple had considered making an offer and had discussed possible business combinations with Time Warner, which owns HBO and CNN, among other valuable media assets,” Niu writes. “When we start talking about massive media-related acquisitions in the U.S., how would Apple even consider paying for it?”
“At the end of last quarter, Apple had “just” $21.6 billion in domestic cash, with the remaining $216 billion being held by foreign subsidiaries. So particularly for any potential U.S.-based deal of this magnitude, cash funding really isn’t an option,” Niu writes. “The other two options would be taking out a massive amount of debt to fund a megadeal, or doing an all-stock transaction. Neither sound appealing… If Apple doesn’t repatriate and still wants to pursue some megadeal, it has to choose some combination of a bad option and a worse option.”
Read more in the full article here.
MacDailyNews Take: How would Apple even pay for a massive acquisition like Time Warner or Netflix? With Apple Pay, of course. 😉
Hopefully, with the next U.S. presidential administration, the bipartisan political will that exists to fix the U.S. corporate tax mess, including some reasonable repatriation solution, will finally produce results.
Under the current U.S. corporate tax system, it would be very expensive to repatriate that cash. Unfortunately, the tax code has not kept up with the digital age. The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free flow of capital… Apple has always believed in the simple, not the complex. You can see it in our products and the way we conduct ourselves. It is in this spirit that we recommend a dramatic simplification of the corporate tax code. This reform should be revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates and implement a reasonable tax on foreign earnings that allows the free flow of capital back to the U.S. We make this recommendation with our eyes wide open, realizing this would likely increase Apple’s U.S. taxes. But we strongly believe such comprehensive reform would be fair to all taxpayers, would keep America globally competitive and would promote U.S. economic growth. – Apple CEO Tim Cook, May 21, 2013