Reportedly, Apple Inc (NASDAQ:AAPL) is set to sell euro-denominated bonds. Per Bloomberg, this will mark the company’s first issuance of bond offering in euros. Reportedly, Apple has hired the services of Deutsche Bank AG NA O.N. (NYSE:DB) and Goldman Sachs Group Inc (NYSE:GS) to manage the sale of bonds. The money received from the sale is anticipated to be used by the iPhone maker for making share buybacks and paying dividends to enhance shareholder value.
Per Bloomberg, the company has been prompted to increase its shareholder value by activist investor Carl Icahn. This initiative has been taken by Apple to take advantage of the extraordinarily low borrowing rates prevailing in Europe currently.
The euro-denominated bond issuance would also save the company from the burden of U.S. repatriation taxes, as otherwise Apple would have to use its huge overseas cash balance for funding the share buyback.
Currently, as per U.S. law, whenever a US-based company intends to bring back its overseas earnings to its base, it is subject to payment of high corporate taxes.
Apple had resorted to debt-financing in the past too. In Apr 2014, it had raised a whopping sum of $12 billion in seven tranches by the sale of bonds. Prior to that, the company had borrowed a sum of $17 billion in six tranches through debt financing. Apple’s recently released large screen iPhones have received positive response worldwide, which we believe will boost top-line growth going forward. We also believe that the partnership with China Mobile will help Apple in the near term.
The growing adoption of iPads in enterprises and education sectors is a significant growth catalyst. The availability of Microsoft Corporation (NASDAQ:MSFT) and the partnership with IBM will boost iPad adoption among enterprises over the long haul.
We believe that the availability of Apple Pay on the newly released devices will be a game-changer for the company. Moreover, the recent deal with Walt Disney Company (NYSE:DIS) which will enable users to watch movies on devices that were running operating systems other than iOS, will widen its reach and drive growth. Currently, Apple has a Zacks Rank #1 (Strong Buy).