Over the last fifteen years, an era of mergers has left the airline industry in the hands of a few giants. Since 2005, nine of the USA’s biggest airlines have been reduced to just four, with Delta, Southwest, American, and United controlling 80% of the U.S. market. Following in the footsteps of American Airlines’ merger with US Airways in late 2013, a new $2.6 billion dollar merger between Alaska Air and Virgin America seeks to further reshape the airline industry.
Another Day, Another Airline Merger: Alaska Airlines Buys Virgin America
Law Firm Squire Patton Boggs to Merge with Carroll Burdick
The law firm of Squire Patton Boggs announced in February that it had reached a deal to acquire the San Francisco-based law firm of Carroll, Burdick & McDonough. The acquisition will increase Squire Patton Boggs’ headcount of roughly 1,500 lawyers by approximately fifty more and could be complete as early as the end of this month.
Business Judgment Rule Tentatively Prevails in Case against Dewey & LeBoeuf Executives
In 2012, the New York based law firm Dewey & LeBoeuf made headlines by filing for Chapter 11 bankruptcy. The firm, which was among Vault.com’s Top 50 Law Firm Rankings from 2009 to 2012, employed more than 1,400 attorneys across fifteen countries before announcing its collapse. Since the announcement, Dewey’s top managers have been at the center of both a criminal and civil lawsuit after allegations surfaced that they had made fraudulent accounting representations to obtain funding.
Dewey & LeBoeuf’s problems began shortly after its inception in 2007, when Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae combined in the largest law firm merger to date. The new firm quickly became a powerhouse in the legal industry, representing high-profile transactions for clients such as A.I.G., BP, JPMorgan Chase, Disney, Dell and eBay. The firm built this enviable list of clientele largely by making “lateral hires,” the practice of drawing high profile lawyers from other firms by extending highly profitable contracts. One such hire was Ralph Ferrara, a successful securities litigator that Dewey was able to lure with an annual salary of $1.6 million and signing bonus of $16 million.
Johnson Controls among the First Tax Inverters of 2016
In one of the first big mergers of the year, Milwaukee-based Johnson Controls will combine with Tyco and move their corporate domicile abroad to Cork, Ireland. The move will save Johnson Controls an estimated $150 million in taxes per year.
Johnson Controls is not the first American company to seek a tax haven abroad. This move is known as “tax inversion,” which is when a company moves its corporate headquarters to a low-income-tax country while continuing its material operations in its original country. Since 1982, an estimated 51 U.S. companies have reincorporated in low-tax countries abroad.
Twitter in Turmoil, but Acquisition Unlikely
Twitter is facing turmoil as its market cap and shares dipped to an all-time low since it went public in November 2013. Since its initial public offering, the company has lost more than half of its market cap. Twitter’s market cap this week is approximately $10 billion, a significant drop from the $40 billion it commanded in the months following its IPO. Additionally, the company’s stock is trading below its $26 IPO price. Twitter’s stock closed February 8 at a low $14.87 per share.
Twitter’s turmoil makes it potentially vulnerable to acquisition. Last month, rumors of News Corp.’s interest in acquiring twitter gave the company’s shares a boost. However, a News Corp. spokesperson subsequently denied the rumors. Other possible acquisition contenders are Google and Facebook, both of which have reportedly tried to acquire Twitter in the past.
Pfizer and Allergan to Merge in $160 Billion Deal
On November 23, 2015, pharmaceutical giant Pfizer, Inc. announced a $160 billion merger deal with Allergan Plc that will create the world’s largest drug maker by sales, keeping pace with the unprecedented surge in healthcare mergers and acquisitions in 2015.
The combined entity will be renamed Pfizer Plc and its headquarters will be in Ireland, where the corporate tax rate is 12.5 percent, compared to 35 percent for a comparably sized company in the U.S. Post-merger, Pfizer shareholders are expected to own about 56 percent of the combined company, with the remaining 44 percent owned by Allergan shareholders. Expected to close in the latter half of 2016, the transaction is subject to certain closing conditions, including receipt of regulatory approvals in the U.S. and the European Union and the receipt of Pfizer and Allergan shareholders’ votes.
Tax Bill Threatens the Dell-EMC Merger
Last October, Dell offered to buy EMC for $67 billion, making it the largest tech merger ever. This merger will create a new technology giant that will sell both consumer and IT products, ranging from personal computers to data storage gear for corporate data centers.
To finance this acquisition, Dell will use a combination of borrowed cash up to $49.5 billion and tracking stocks in an EMC subsidiary called VMware. The offer valued EMCat $33.15 a share, for which Dell will pay $24.05 in cash per share and give EMC shareholders a special stock that tracks the share price in VMware. Intended to offset the amount of debt Dell will take on, those tracking stocks seriously threaten the feasibility of the deal because of a possible $9 billion tax bill.
Marriott to Acquire Rival Starwood Hotels in $12.2 Billion Deal
On November 16, 2015, Marriott International announced that it is acquiring its rival Starwood Hotels & Resorts Worldwide in a $12.2 billion deal, becoming the largest hotelier in the world.
The deal brings Starwood’s 11 brands, including W Hotels, St. Regis, and Westin, together with Marriott’s 19 brands, which include Ritz-Carlton, Residence Inn, and Courtyard. The combined company will be able to offer more than 5,500 owned or franchised hotels with 1.1 million rooms across more than 100 countries.
Maker of ‘Candy Crush’ Acquired by ‘Call of Duty’ Mastermind
Two of the highest-grossing video games are set to become unlikely siblings due to an announcement made last Monday by Activision Blizzard (ATVI) to acquire King Digital Entertainment (King) for $5.9 billion. ATVI, the creator of console video-games such as ‘Call of Duty,’ is valued at roughly $25 billion, making it one of the video game industry’s highest-valued companies. King, the third-ranked mobile game publisher, is best known for its highly-addicting ‘Candy Crush Saga.’ The acquisition has been approved by the boards of both companies, but because King is based in Ireland, it must also be approved by King’s shareholders and the Irish High Court, pursuant to Ireland’s Companies Bill of 2012.
In a press release, ATVI CEO Bobby Kotick expressed excitement about snatching up “one of the world’s most successful mobile game companies.” Instead of starting from scratch, ATVI has positioned itself in the fast-lane to capitalize on the developing mobile gaming market, which Kotick asserts “is the largest and fastest-growing opportunity for interactive entertainment.” With mobile game sales expected to increase by 21 percent over the next year, in comparison to 7 percent for computer games and only 2 percent for console games, Kotick’s statement certainly carries some punch.
SABMiller Rejects $104 Billion Takeover Bid From Rival Anheuser-Busch
After rejecting two private proposals, SABMiller snubbed Anheuser Busch InBev’s first publicized bid of $104 billion on Wednesday. SABMiller, the world’s No.2 brewer, cited AB’s substantial undervaluation of the company as their continued reason for rejection. SABMiller’s board of directors, excluding directors nominated by its largest shareholder, Altria Group, dismissed the price as too low.
However, Altria, maker of Marlboro cigarettes, owns more than 25% of the brewer and has urged the board to engage in talks with AB. The tobacco giant has said that it would accept a deal at or above AB’s proposed price of £42.15 ($64.2) a share. This offer would net SABMiller a 44% premium over their closing price the day media began to speculate about a potential takeover. The Santo Domingo family, which owns around 15% of the giant brewer through BevCo Limited, stuck with the board in rejecting the first public price.