Obama Dashes Pfizer/Allergan Inversion Dreams; Oil-Vey: The Wrath of the DOJ; Verizon Gets Awesome(ness);

Breaking up is hard to do…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Pfizer can kiss its $160 billion merger with Allergan goodbye all thanks to some new treasury rules that seemed to have been designed just with this particular deal in mind. President Obama unveiled the new rules that make it harder for corporations to do inversions and basically make them not fiscally worth it. The rules make sure to target “serial inverters” which are foreign companies that became corporate giants by buying up American companies for tax reduction purposes. President Obama and the Treasury are trying to end corporate inversions and calls the practice “one of the most insidious tax loopholes out there, fleeing the country just to get out of paying their taxes.” Plenty of American companies have moved parts of their operations to countries where the corporate tax rates are more hospitable and essentially reincorporate in those places. The Pfizer/Allergan deal would have been the largest deal of its kind and would have effectively knocked off a $1 billion chunk of change from Pfizer’s corporate tax bill. Which explains why Pfizer was so eager to do its deal with Ireland-based Allergan. According to President Obama, global tax avoidance is a “huge problem.” So is climate change and the roster of presidential candidates, by the way, but Obama was only able to do something to curtail inversions. Just saying. Now experts suspect other foreign companies with large American operations will fall under the microscope and things could get ugly for them as well. Pfizer will now have to pay Allergan $150 million to reimburse the company for expenses from the deal that wasn’t. At least its not as much as the $1.6 billion AbbVie had to pay Shire back in 2014 when that $55 billion deal fell apart. Why Congress can’t make the corporate tax rate just as hospitable in the United States as it is in other countries, and maybe even attract foreign companies to come here and pay billions in taxes is a mystery to me. If someone has an answer, I’d love to hear it.

Oil drink to that…

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Image courtesy of renjith krishnan/FreeDigitalPhotos.net

Pharmaceutical Corporations aren’t the only ones displeased the with the U.S. government today. Enter two of Big Oil’s biggest players who have some unkind thoughts for the Department of Justice. Halliburton and Baker Hughes happen to be the second and third largest oil companies and control 15.8% of the market share. Together, the two companies pulled down a combined revenue of $39.3 billion. Halliburton alone scored over a $5 billion profit for 2014. But in 2015, the oil giant didn’t fare nearly as well and instead posted a $165 million loss with a major decline in revenue. The drop in oil prices have left dozens of oil companies filing for bankruptcy as hundreds of thousands of people in the industry are now without jobs. Halliburton and Baker Hughes think a merger would help keep both of them from going under but the DOJ is not buying it. The DOJ says anti-trust is written all over this deal, calls it anti-competitive and feels it would make the newly-formed entity way too powerful. The DOJ argues that the deal would lead to much much higher prices and consumers would be at the mercy of the companies. But maybe Baker Hughes can console itself with the $3.5 billion break-up fee it gets to collect from Halliburton now that the deal won’t be going through. At least for now…

Everything is awesome…

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Image courtesy of renjith krishnan/FreeDigitalPhotos.net

As wireless companies hunt for new ways to make money, Verizon figured out one way to do it – through the very hip and very lucrative teen demographic. So like any eager telecom giant, it found a business to buy that it hopes will help them pull in some of more cash. Enter AwesomenessTV, a company that’s home to some of YouTube’s most popular channels and features all sorts of short videos, from dating advice to celebrities. Verizon plunked down $160 million for a 24.5% stake in the company that boasts 3.6 million subscribers. DreamWorks Animation SKG Inc already owns a 51% stake while Hearst Corp owns the remaining stake. DreamWorks Animation was prescient enough to buy AwesomenessTV back in 2013 for the bargain price of just $33 million. This new deal puts AwesomenessTV’s latest valuation at a very cool $650 million. Part of the deal includes Verizon creating a mobile video service for the endeavor and it will be a part of Verizon’s go90 mobile video app – which of course, will be exclusive to Verizon.  Double boom for Verizon because there tends to be lots of juicy revenue in mobile video that comes from both data usage and advertising. AwesomenessTV already had an exclusive deal with Verizon to provide content for go90 so this new development ought to fit in nicely. DreamWorks Animation’s Jeffrey Katzenberg must also be pretty stoked about the deal since he expects annual revenue for AwesomenessTV to double because of it.

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