4 ms·

There was a brief window, back when Apple started taking off post-Jobs, when their pile of money put them in danger of a hostile, leveraged "bust-up" takeover -

There was a brief window, back when Apple started taking off post-Jobs, when their pile of money put them in danger of a hostile, leveraged "bust-up" takeover -- i.e. an outsider could buy the company with borrowed money by using Apple's assets and cash flow as collateral. I always found that idea fascinating. Of course, that moment passed pretty quickly.

lilbobbytables 10y ago
Why isn't that still a concern?
- afthonos 10y ago
  The idea was that they would borrow enough money to buy a majority of Apple's stock, and then repay the loan with the cash reserves. For that to work, the cash reserves must be close to half the value of the company. Since Apple's market cap is now $790B, half the value is $370B, which means that even with the cash reserves, they'd be $123B short of being able to repay, and they'd need it available on day one to execute the hostile takeover. And like they say, $100B here, $100B there, soon you're talking real money.
  - valuearb 10y ago
    Apple has also taken on debt since then, needed it to fund dividends since most profits trapped overseas. Also any acquirer still has to pay the taxes on repatriating those overseas profits if they want to use them in the acquisition. Given effective tax rates (US + CA) over 40%, they can only use barely more than half the overseas profits. Essentially Apple's available cash is much less than it appears.
    - _pmf_ 10y ago
      > since most profits trapped overseas. That's certainly one way to put it.
- micv 10y ago
  The amount of money involved in an Apple takeover now would be beyond enormous. Even assuming they paid no premium on the current share price whatsoever, which is rather unlikely, they would have to stump up $500 billion or so. I strongly suspect it would be the largest such deal ever made though I'm too lazy to look it up.
dsacco 10y ago
Do you have any specific reading material on this? I'd be interested in researching that a bit.
- fullshark 10y ago
  The book Barbarians At The Gate about the leveraged buy out of Nabisco.
randyrand 10y ago
but would they even sell? why would they agree to sell the company? cool idea though
- ghaff 10y ago
  "They" (as in the majority of the shareholders holding voting shares) would probably have been more than willing for a sufficient premium over the share price. Unless insiders have majority control, hostile takeovers do happen. (Though they're less common than they were for a variety of reasons.)
- pjc50 10y ago
  Public listed companies have little choice about who they sell to. That's part of being public.
  - valuearb 10y ago
    Publicly listed company management has less choice, but the company itself (i.e. the shareholders) has all the choice in the world. Management's preferences can carry lots of weight though. If Tim Cook supports an aquisition offer it's far more likely to pass than if he opposes it.
    - stale2002 10y ago
      There is no "passing" or "agreeing" in hostile takeovers. You just go to the new york stock exchange and start buying up the publicly traded stock.
      - pjc50 10y ago
        Well, sort of: once over a control threshold the takeover process gets complicated and the shareholders do have some rights of refusal. https://money.stackexchange.com/questions/21255/how-do-public-company-buyouts-work https://money.stackexchange.com/questions/21255/how-do-publi...
      - valuearb 10y ago
icpmacdo 10y ago
At this point are they safe from that with a market cap of 740.02B? What financial institutions have access to that kind of leverage?
- pfarnsworth 10y ago
  Only government sovereign wealth funds, like Saudi Arabia, Norway or China.
Hurtak 10y ago
I somebody started doing this, wouldn't it make the stock price skyrocket and make the whole plan unprofitable?
- throwaway2048 10y ago
  they would do it very quietly
  - valuearb 10y ago
    It's impossible to do quietly. Apple has 5.2B shares. It trades around 25M shares a day on average. If you bought every traded share every day for 100 trading days (almost 5 months) you'd still be just shy of 50%. And the share price would have exploded (like up 10x) and everyone and their brother would know something is up. Even if you bought 10M shares a day, you'd drive up the stock price substantially (like 2x), and now you need over a year to do it. Again it would be obvious. When Porsche tried to be sneaky about buying VW, they started in 2004 when VW was 33 euros a share. By mid 2005 exchange rules forced them to admit what they were doing, the stock price had doubled and they hadn't even gotten to 20%. By the time they reached 40% the stock price was over 200 and actually peaked over 1,000 for a day before Porsche capitulated and was forced to sell their shares. Thats why acquisitions are done with tender offers. The buyer may try to buy shares before the tender, but have to be careful not to break exchange rules or the law that obligates them to publicly report 1% and 5% positions when they get there. A tender offer just says, we'll buy X% for $Y per share, and allows every shareholder to sell shares at the same price with the same info.
  - mmariani 10y ago
    It doesn't work. Just ask Porsche.

lilbobbytables 10y ago

Why isn't that still a concern?

afthonos 10y ago
The idea was that they would borrow enough money to buy a majority of Apple's stock, and then repay the loan with the cash reserves. For that to work, the cash reserves must be close to half the value of the company. Since Apple's market cap is now $790B, half the value is $370B, which means that even with the cash reserves, they'd be $123B short of being able to repay, and they'd need it available on day one to execute the hostile takeover. And like they say, $100B here, $100B there, soon you're talking real money.
- valuearb 10y ago
  Apple has also taken on debt since then, needed it to fund dividends since most profits trapped overseas. Also any acquirer still has to pay the taxes on repatriating those overseas profits if they want to use them in the acquisition. Given effective tax rates (US + CA) over 40%, they can only use barely more than half the overseas profits. Essentially Apple's available cash is much less than it appears.
  - _pmf_ 10y ago
    > since most profits trapped overseas. That's certainly one way to put it.
micv 10y ago
The amount of money involved in an Apple takeover now would be beyond enormous. Even assuming they paid no premium on the current share price whatsoever, which is rather unlikely, they would have to stump up $500 billion or so. I strongly suspect it would be the largest such deal ever made though I'm too lazy to look it up.

dsacco 10y ago

Do you have any specific reading material on this? I'd be interested in researching that a bit.

fullshark 10y ago
The book Barbarians At The Gate about the leveraged buy out of Nabisco.

randyrand 10y ago

but would they even sell? why would they agree to sell the company? cool idea though

ghaff 10y ago
"They" (as in the majority of the shareholders holding voting shares) would probably have been more than willing for a sufficient premium over the share price. Unless insiders have majority control, hostile takeovers do happen. (Though they're less common than they were for a variety of reasons.)
pjc50 10y ago
Public listed companies have little choice about who they sell to. That's part of being public.
- valuearb 10y ago
  Publicly listed company management has less choice, but the company itself (i.e. the shareholders) has all the choice in the world. Management's preferences can carry lots of weight though. If Tim Cook supports an aquisition offer it's far more likely to pass than if he opposes it.
  - stale2002 10y ago
    There is no "passing" or "agreeing" in hostile takeovers. You just go to the new york stock exchange and start buying up the publicly traded stock.
    - pjc50 10y ago
      Well, sort of: once over a control threshold the takeover process gets complicated and the shareholders do have some rights of refusal. https://money.stackexchange.com/questions/21255/how-do-public-company-buyouts-work https://money.stackexchange.com/questions/21255/how-do-publi...
    - valuearb 10y ago

icpmacdo 10y ago

At this point are they safe from that with a market cap of 740.02B? What financial institutions have access to that kind of leverage?

pfarnsworth 10y ago
Only government sovereign wealth funds, like Saudi Arabia, Norway or China.

Hurtak 10y ago

I somebody started doing this, wouldn't it make the stock price skyrocket and make the whole plan unprofitable?

throwaway2048 10y ago
they would do it very quietly
- valuearb 10y ago
  It's impossible to do quietly. Apple has 5.2B shares. It trades around 25M shares a day on average. If you bought every traded share every day for 100 trading days (almost 5 months) you'd still be just shy of 50%. And the share price would have exploded (like up 10x) and everyone and their brother would know something is up. Even if you bought 10M shares a day, you'd drive up the stock price substantially (like 2x), and now you need over a year to do it. Again it would be obvious. When Porsche tried to be sneaky about buying VW, they started in 2004 when VW was 33 euros a share. By mid 2005 exchange rules forced them to admit what they were doing, the stock price had doubled and they hadn't even gotten to 20%. By the time they reached 40% the stock price was over 200 and actually peaked over 1,000 for a day before Porsche capitulated and was forced to sell their shares. Thats why acquisitions are done with tender offers. The buyer may try to buy shares before the tender, but have to be careful not to break exchange rules or the law that obligates them to publicly report 1% and 5% positions when they get there. A tender offer just says, we'll buy X% for $Y per share, and allows every shareholder to sell shares at the same price with the same info.
- mmariani 10y ago
  It doesn't work. Just ask Porsche.