News analysis

Deals worth $501 billion blocked by Washington since 2009

WASHINGTON • Regulators in the Obama administration have blocked US$370 billion (S$501 billion) worth of large deals since 2009 to protect competition, jobs and the American tax base.

The latest in the series was Pfizer's takeover of Dublin-based Allergan which was torpedoed last Tuesday after new rules by the United States Treasury Department came into effect, much to the dismay of Corporate America, the Financial Times reported.

The Pfizer-Allergan deal, worth US$160 billion, was stopped as the new regulations attempt to limit "inversions" - in which American companies are acquired by foreign companies, legally lowering the tax burden of US companies.

More big-ticket mergers and acquisitions were blocked than during the Bill Clinton and George W. Bush eras put together, FT.com said.

In 2014, AbbVie pulled the plug on its US$55 billion takeover of Ireland-based Shire - another "inversion" that would have enabled it to slash its US tax bill - due to domicile.

AT&T dropped its US$39 billion bid for T-Mobile US in 2011 after the US Department of Justice sued to block the deal, while Nasdaq's US$11 billion attempt to take over the New York Stock Exchange was thwarted by anti-trust concerns.

In contrast, the George W. Bush administration blocked just one large deal - the US$2 billion takeover of Hughes Electronic by EchoStar, the satellite television group.

Two big merger and acquisition transactions were torpedoed under Mr Clinton: the US$12 billion takeover of military supplier Northrop Grumman by Lockheed Martin, and MCI WorldCom's US$125 billion bid for Sprint, the mobile phone network.

The Obama administration's interventionist posture has provoked anger on Wall Street. One large life sciences investor with holdings in Pfizer, Allergan and AbbVie said the administration is building an "artificial prison for pharmaceutical companies, rather than dealing with the underlying issue" of relatively high taxes for US companies.

Since statutory corporate tax rates are among the highest in the industrialised world in the US, and America taxes companies on their worldwide incomes, companies in practically any other country make tempting inversion targets. Those in low-tax countries like Ireland are particularly popular, Bloomberg said.

Ms Debbie Feinstein, director of the Federal Trade Commission's competition bureau, told FT: "There's no question that we're going to be aggressive against conduct or mergers that are going to harm competition or consumers. That's our job and we take it very seriously and we're going to do it very carefully. We're not afraid to litigate."

A version of this article appeared in the print edition of The Straits Times on April 09, 2016, with the headline 'Deals worth $501 billion blocked by Washington since 2009'. Print Edition | Subscribe