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Washington Throws Its Weight Around

US tax rules put the kybosh on the biggest deal in 15 years last week when Pfizer and Allergan killed off their $160 billion merger.

Seen as a win for the Obama administration which wants to stop deals known as inversions, it has a lot of advisers face-palming (or likely, really far worse) and losing an estimated $200 million in fees.

The two called off the deal Wednesday after the Treasury introduced new rules that made the merger untenable. The rules – aimed at so-called serial inverters – are designed to stop Pfizer moving its headquarters to Ireland (home of Dublin-based Allergan) to avoid billions of dollars in US taxes.

Later the same day the US Justice Department said it was suing to block the $35 billion merger of oil field services providers Halliburton and Baker and Hughes on competition grounds.

And while it’s not the first time US inversion rules have killed off a big deal, it did demonstrate the Obama administration’s willingness to challenge big mergers and takeovers, which in turn has an impact on the appetite for large and risky transactions.

Some $370 billion of large deals have been abandoned since Obama was elected in 2009, the FT wrote last week. In fact, more large M&A deals have been blocked during Obama’s administration than in the Clinton and Bush eras together.

Meanwhile, the shareholders of Starwood Hotels & Resorts and Marriott voted to approve Marriott’s acquisition and the creation of the world’s largest hotel company last week. The cash-and-stock deal went ahead after China’s Anbang Insurance withdrew its bid the week before.

In Europe, France’s Vivendi (which owns Universal Music) and Mediaset (the Italian media company controlled by Silvio Berlusconi) have entered a share swap agreement in which both get a 3.5% stake in each other. Vivendi is also picking up Mediaset’s pay-TV arm, with its estimated 2 million viewers, valued at about $850 million.

Now Vivendi can hope to compete a little more with Netflix and Amazon in Europe. And Silvio Berlusconi can carry on with the bunga bunga.

There are eyes on Virgin Australia after major shareholder Air New Zealand said it would sell all, or part, of its almost 26% stake (worth around $348 million) in the airline earlier this month. Singapore Airlines, the third-largest shareholder in Virgin, has jumped on it and upped its stake to 23.11%, from 22.91%.

First NZ Capital and Credit Suisse are advising New Zealand’s national airline on its options.

Winging our way over the Pacific, French Bank BNP Paribas is planning to launch an IPO of its First Hawaiian Bank subsidiary, busting the lull in the US IPO market. The island state’s oldest and largest bank would seek to raise about $1 billion in an offering valuing it at as much as $5 billion.

It could be big. The numbers put it at around the sixth-largest US bank IPO since Dealogic began keeping records in 1995.

We predict a lot of suits being swapped for Hawaiian shirts in the coming months. And many site visits.

Canada’s largest pension fund has paid $2.5 billion for 40% of commodity giant Glencore’s agricultural arm. Canada Pension Plan Investment Board’s purchase – subject to regulatory approval – values Glencore’s agricultural business at $6.25 billion.

The sale forms part of Glencore’s strategy to cut some $26 billion in debt as it struggles with plunging commodity prices. The Canadian fund will get two seats on the board and the potential to buy a further 20% stake.

Glencore CEO Ivan Glasenberg told the FT he hoped it would provide firepower for his group to do further deals in the sector. The company has ambitions to sell Australian infrastructure assets and two copper mines.

In Australia, momentum is said to be gathering for the sale of the Gladstone Liquefied Natural Gas pipeline, which could sell for as much as A$6 billion.

Business Spectator reports that two prospective buyers sounded out in recent weeks were under-bidders for the British Gas pipeline, which was sold to APA Group last year for $4.6 billion.

Not all the owners are on board with a sale though and to be able to do a deal similar to APA, it’s likely the buyer of GLNG would need to offer contracted revenues from the pipeline through take-or-pay contracts, which they may not want to do.

Goldman Sachs is advising.

News Ltd in Australia is also reporting that APA Group and AGL Energy are among the parties shortlisted to buy the Alinta energy business. Deutsche is advising the two. Other names being thrown around in the mix include China Huadian, Shanghai Electric and Morgan Stanley.


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