Apple seems to be on an acquisition spree and its next purchase might help it gain a foothold in the online video streaming market. While some earlier rumors speculated that Apple could be launching a video subscription service of its own this year, Citi analysts now believe there’s a good chance that Apple might acquire Netflix instead. President Trump's administration recently came up with a corporate tax cut initiative designed to prompt U.S. companies to spend their money locally rather than abroad. According to two Citi analysts, Asiya Merchant and Jim Suva, Apple could be looking to take advantage of the development by buying Netflix, which is already an established and widely popular online video streaming service with numerous subscribers worldwide. The analysts estimate there’s a 40 percent chance for the deal to happen.
Suva and Merchant are seemingly basing their projection on the fact that most U.S. companies have a lot of cash outside of the United States, and the new taxing rules would allow them to repatriate much of it with a single, one-time tax rate. With President Trump’s corporate tax cut, Apple would reportedly be incentivized to bring roughly $220 billion in cash back to the United States. The move is expected to significantly boost spending by large U.S. corporations such as Apple. The analysts note that Apple has nearly $250 billion in cash outside of its home country and has been reluctant to repatriate it due to high taxation rates. The tax reform could change that and Apple would have more cash at hand for stock buybacks, mergers, and acquisitions in its home market, with Netflix being widely considered as a good investment for any company with enough financial pull to complete such a move.
The theory that Apple might be looking to acquire Netflix is not too far-fetched. The Cupertino-based company has already made heavy investments recently, including its $400 million acquisition of Shazam in late 2017. Apple also paid top dollar for Beats Audio, which still ranks as its most expensive acquisition to date. Acquiring Netflix would definitely not be cheap, but the video streaming service could be a real asset to Apple as the tech giant continues its video push. Netflix is valued at more than $80 billion and some analysts expect a 30 percent premium on top of that, suggesting Apple could be looking at $104 billion in total to acquire Netflix, which would make the transaction the largest tech acquisition in the history of the industry which dwarfs Dell's $67 billion acquisition of EMC in 2016. Apple’s total assets indicate it could match the asking price, but it remains to be seen whether such a deal will actually materialize.