How would Apple even pay for a massive acquisition like Time Warner or Netflix?

“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

10 Comments

  1. All deals like this are done with stock and/or debt, seldom with just cash on hand. AT&T / Time Warner deal is half cash/half stock. AT&T had just under 6 billion dollars in cash as of 9/30. So AT&T says that it is going to go to the debt markets to come up with the $40+ billion in cash it would need.

    So why for Apple would it not “sound appealing” when that’s what AT&T and most companies do in an acquisition. The real question is does the acquired company fit and can the acquirer generate value by owning the new entity.

  2. This is a ridiculous article scenario. There are a multitude of ways to buy a company other than a cash only deal and some are much more preferable by leveraging tax breaks and issuing debt bonds – which Apple has done twice in the last 3 years.
    But then this is Motley Fool.

    1. A BTW: What’s going on now with the Media Oligarchy is an attempt to keep the ‘bundling’ bullshit system going. The Internet ends up a bunch of ‘bundles’ you have to buy into in order to get the media you want. As per usual that means buying piles of CRAP alongside what you actually want. It’s the same old shite as the cable system. That’s why it will FAIL. We’re not putting up with the user abuse any longer.

      It’s à la carte or suffer the consequences, aka a continued decline in media revenues.

      Someone, please, cart these old fogey media oligarchs to The Home and let’s get on with living in the 21st century. The 20th century is dead and gone. *clue*

  3. I would be scared to death having so much money overseas. Even if it costs them something in being like the rest of us peons and pays taxes, I think it’s still better to have some sort of diversity. The world economies are far far more unstable than the US.
    I would hate to see it all just go poof up in smoke all because they were greedy bastards.

    It would a nice cautionary tale though.

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