Apple's (AAPL) Beats Acquisition Will Have No Impact on Ratings, Liquidity - Moody's

Moody's Investors Service says Apple Inc's $3.0 billion acquisition of Beats Electronics, LLC (B2 RUR up), announced on May 28, 2014, has no impact on Apple's (Nasdaq: AAPL) ratings or liquidity. The consideration, of which $2.6 billion would be paid in cash at closing, with an additional $400 million to vest over time, is the largest acquisition in the company's history. Given Apple's healthy cash and investments balances of $151 billion at March 29, 2014, augmented by $12 billion from a recent debt issuance and first-time commercial paper borrowings, the acquisition price, albeit at a high multiple, will not strain Apple's liquidity nor the Aa1 rating. Moody's believes that a portion of the purchase price will be funded with Apple's overseas cash balances.

Moody's analyst Gerald Granovsky said, "Moody's believes the acquisition will provide modest revenue growth opportunities for Apple to increase Beats' headphone sales by introducing them to new markets. But the greatest benefit in Moody's view would come from an improved cost structure for Beats by being integrated into Apple's world class supply chain, and possible incorporation of the Beats product portfolio and technology in developing future wearable devices and in-home technologies."

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