Market analysts say that there is a good chance that Apple will buy Netflix in 2018, following the corporate tax changes introduced by President Donald Trump’s administration.
Analysts Jim Suva and Asiya Merchant from Citi estimate that there is a 40% chance of the deal, which could be worth around $75bn, being made this year. According to Suva and Merchant, the cut in the overall corporate tax burden, combined with the allowance for corporations to repatriate money without incurring significant taxation, will provide Apple with funds to make new acquisitions.
The company is currently estimated to have around $252bn, most of it overseas. Repatriating that cash will enable it to go after new targets in 2018, and in a note sent to clients of Citi, Suva and Merchant say Netflix is top of the list of likely purchases.
Apple has struggled to provide an attractive movie or television package for years. While iTunes has been an undoubted success, viewers have increasingly turned to other services such as Hulu, Amazon or Netflix for their television or movie needs.
They have recently entered the content creation market with the announcement of their first scripted video series, which is set to star Jennifer Aniston and Reese Witherspoon. But acquiring Netflix would be an easier way to benefit from popular content, and according to Suva and Merchant, the corporate tax changes give them the ability and incentive to make a move for the popular streaming service. Suva and Merchant concluded by stating:
“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 $220bn for M&A or buybacks.”