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Could Apple Buy Tesla?

Daniel Sparks, The Motley Fool

Apple (NASDAQ: AAPL) reportedly offered to buy Tesla (NASDAQ: TSLA) at a price around $240 per share in 2013, said Roth Capital Partners analyst Craig Irwin on Tuesday. The surprise news comes as the electric-car maker's shares fell below $200 amid growing concerns from analysts covering the stock.

Though the bid was in 2013, recent pressure on Tesla's stock price makes this news particularly interesting. After all, in 2013, Tesla was only delivering just over 22,000 vehicles a year. Trailing-12-month deliveries today, however, are closing in on 300,000. If Apple really did consider buying Tesla at a higher price when sales were much lower, it would make sense for the tech giant to revisit the potential acquisition as the automaker's stock slumps.

Tesla vehicles outside of the company's factory in Fremont, California.

Image source: The Motley Fool.

Tesla: An acquisition target?

"Around 2013, there was a serious bid from Apple at around $240 a share," said Irwin in an interview with CNBC. He continued:

This is something we did multiple checks on. I have complete confidence that this is accurate. Apple bid for Tesla. I don't know if it got to a formal paperwork stage, but I know from multiple different sources that this was very credible.

We may never know whether this rumored offer really happened. But considering that Musk admitted in a 2014 interview with Bloomberg that he met with Apple's head of acquisitions in the spring of 2013, it's quite possible.

At the time, Musk said it was "very unlikely" Tesla would be acquired by Apple, explaining: "We need to stay super focused on ... creating a compelling mass-market electric car. And I'd be very concerned in any kind of acquisition scenario, whoever it is, that'd we become distracted from that task which has always been the driving goal of Tesla.

But Tesla's mass-market car, Model 3, has now arrived. In addition, production has already ramped up to an annualized rate of several hundred thousand units per year.

Why an Apple-Tesla merger could make sense today

If there ever were a good time for Tesla to accept a buyout offer from Apple, today would be it. Shares have been under immense pressure recently, sliding nearly 30% over the past 30 days as investors fret the company's big first-quarter loss and as a growing number of analysts make bearish calls on the stock.

From Apple's view, Tesla could give the tech giant access to a major growth opportunity. Tesla's trailing-12-month vehicle sales are up 158% year over year and management expects total vehicle deliveries in 2019 to be between 360,000 and 400,000, up 45% to 65% year over year.

The big holdup for Apple, of course, could be the capital-intensive nature of Tesla's business that has made sustainable profitability look like a pipe dream to date. But the automaker believes profitability is on the horizon, with management guiding for positive free cash flow for the remaining three quarters of 2019. If Tesla is truly making progress toward this target, the electric-car maker could be a good acquisition target for Apple -- especially now that its stock is trading lower.

On the other hand, Apple is known for its penny-pinching approach to acquisitions and has stayed away from buying companies outside of its core competence. A Tesla acquisition, therefore, is somewhat out of character for the company. But if Apple is already considering a foray into electric vehicles or autonomous-vehicle technology -- and rumors around its "Project Titan" suggests it may -- then an Apple-Tesla merger could make sense.

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Daniel Sparks owns shares of Tesla. The Motley Fool owns shares of and recommends Apple and Tesla. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.