Goldman Seen Joined by Deutsche Bank on Apple Offering

Goldman Sachs Group Inc., which has been advising Apple Inc. on how to deal with its multibillion-dollar cash pile, and Deutsche Bank AG, Germany’s biggest lender, are in the lead to help the iPhone maker sell bonds for the first time in 17 years.

Apple asked the two banks, based in New York and Frankfurt, to arrange phone interviews with fixed-income investors today in advance of a potential deal, according to a person familiar with the offering who asked not to be identified because the terms aren’t set.

Apple, the largest U.S. maker of smartphones, has had little need for Wall Street’s services since its 1980 initial public offering and its last bond deal in 1996. Although company co-founder Steve Jobs married a former Goldman Sachs fixed-income strategist, he disliked bankers and preferred doing deals without them, according to a former Apple executive who reported to Jobs. In 2009, Apple hired Adrian Perica, a Goldman Sachs investment banker, to build a mergers-and-acquisitions team.

“Goldman’s going to be the logical play, but that doesn’t mean the others aren’t going to try,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York who rates Goldman Sachs’s stock outperform. “If you’re one of the big technology players, you’re going to want to win this thing -- it gives you bragging rights.”

Spokesmen for both banks declined to comment on whether their firms will lead the bond offering. Steve Dowling, a spokesman for Apple, declined to comment beyond the company’s remarks announcing the cash plan last week.

Stock Buybacks

On April 23, Cupertino, California-based Apple said it would return an additional $55 billion in cash to shareholders to compensate for a stock that’s dropped on signs that the company’s growth is slowing. Although it has $145 billion of cash, Apple said it will use debt to help finance a total capital reward of about $100 billion to shareholders. By borrowing the money, Apple can avoid taxes that would apply should it bring funds back into the U.S. from overseas. More than $102 billion of its cash and investments was offshore at the end of March, the company said last week.

Apple Chief Executive Officer Tim Cook, who became CEO in August 2011 when Jobs resigned, hired Goldman Sachs after last year’s shareholder meeting to help the company improve transparency and governance, including what to do with its growing cash pile, according to people familiar with the decision. The firm has helped advise Apple’s board on ways to return cash to shareholders and respond to hedge fund manager David Einhorn, who began publicly demanding action, a person with knowledge of the plans said in February.

Next Takeover

Cook limits his appearances at Wall Street investor conferences to Goldman Sachs’s annual event, held in February.

Deutsche Bank advised Apple on its takeover of Next Computer Inc., which was completed in 1997 and led to Jobs’s return to Apple, according to data compiled by Bloomberg. The company is the top manager of corporate debt issued in the euro region, the data show.

Because investment-grade debt offerings typically pay low fees, banks may offer to do the transaction for little or no charge, Hintz said.

“This is going to be a prestige-per-share, not an earnings-per-share, deal,” said Hintz, who worked as Morgan Stanley’s treasurer and as the chief financial officer at Lehman Brothers Holdings Inc. earlier in his career. “We’re really talking about a deal that’s going to be done as close to gratis as you can get.”

Apple IPO

While Morgan Stanley was the lead manager of Apple’s 1980 initial public offering, Goldman Sachs was involved in both of Apple’s most recent bond sales in 1994 and 1996. With Apple approaching bankruptcy in June 1996, then-CFO Fred Anderson hired Goldman to lead a $661 million convertible bond offering that provided the liquidity for Apple’s comeback after Jobs rejoined the company as CEO the following August, Anderson said in an interview.

Goldman was “the preferred banker when I was CFO at Apple during 1996 to 2004,” said Anderson, a co-founder of venture capital firm Elevation Partners LP.

Goldman Sachs’s investment-banking team, led by David Solomon, John S. Weinberg and Richard Gnodde, has a higher ranking among advisers on takeovers and stock underwriting than on debt underwriting. That’s because debt-sale mandates are often awarded to bigger banks that provide corporate loans and lines of credit. Yet Apple’s cash hoard means it doesn’t need any bank loans, making it easier to compete for the new bond sale.

Goldman Sachs ranks first this year among managers of debt sales for technology companies, according to data compiled by Bloomberg.

Goldman Sachs climbed less than 1 percent to $145.11 at the close in New York. Apple advanced 3.1 percent to $430.12.

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