Business Without Borders – International Business and Tax Planning Blog

Archive for the ‘Mergers & Acquisitions’ Category

• Prime Minister Sinzo Abe is pushing Japan to enter negotiations to join the Trans-Pacific Partnership, which is a free-trade pact that includes the U.S. and other Pacific nations. Viewing the move as a “last chance” to prevent Japan from being “left out,” Abe is facing strong opposition from Japan’s agricultural sector, which has historically been adverse to trade liberalization. Some of the effects of free trade would be the elimination of tariffs, and the lessening of governmental regulations and subsidiaries. Proponents argue that the move would result in an expansion of “Japan’s economy by at least 3.2 trillion Yen, or $33 billion – about 0.66 percent”, while others, such as the agricultural cooperatives, are concerned about the effect free trade would have on the Japanese lifestyle, and in particular Japan’s universal insurance system.
• India is again being criticized by a member of the business community for the country’s efforts to bolster its generic drug industry. The complaint, which was levied by Chief Intellectual Property Counsel of Pfizer, reflects the view that India has created a “‘protectionist intellectual property regime’ that is deterring U.S. investment in the South Asian nation.” Citing last year’s patent revocation for a Pfizer cancer medication, and the nation’s use of compulsory licensing, the Pfizer representative contended that these moves by the country reflect efforts to further the interests of domestic generic drug manufacturers and intimated that such efforts are being done at the expense of multinational drug companies. India’s “new patent law still sets a high bar for drug companies to receive patents on new innovations, and allows generics companies – not just the government – to apply for compulsory licenses to override them.” The resulting tension between market participants may be a contributing factor to the uptick in filed disputes at the WTO arising out of U.S.-India trade relations.
• Deal news: SoftLayer Technologies. Reports have privately held database web hosting company SoftLayer Technologies Inc. being considered as a target for acquisition. Among the potential suitors are IBM and EMC, although neither company (nor Softlayer) has commented. Based on other purchases that involved similar businesses, including CentruyLink’s purchase of Savvis for $2.5 billion and Verizon Communications’ purchase of Terremark Worldwide for $1.4 billion, some are anticipating that the purchase price for any deal involving SoftLayer could reach the $2 billion level. Hostess Brands. McKee Foods Corp. is set to acquire Hostess’ Drake’s snack cake business for approximately $27.5 million. The transaction is part of the ongoing liquidation of Hostess, which has already seen a sale to Apollo Global Management of its snack cake business, a sale to Flower Foods Inc. of most of its bread business, and will next see an auction of other Hostess brands in the coming days.

The International Law Group of the Bridgewater-based law firm Norris McLaughlin & Marcus, P.A., represented Lombard Risk Management plc in its acquisition of the regulatory reporting business of banking consultancy SOFGEN Holdings Limited for $4.25 million in cash, loan notes and equity. Robert C. Gabrielski, a Member of the firm and Chair of its Business and International Law Groups, led the team of attorneys that worked on the deal, including Wendy Z. Greenwood, corporate; Charles A. Bruder, employee benefits; Jeffrey M. Casaletto, environmental; and Jeanne Hamburg, intellectual property.

Lombard Risk, a leading provider of integrated collateral management and liquidity, regulatory and MIS reporting solutions for the financial services industry, already had a major business in regulatory reporting through its existing REPORTER product, which is used globally, including in the United States. The main part of the business acquired is the U.S. and Canada regulatory reporting product REG-Reporter, which is used by Bank of America and Royal Bank of Canada, among others. The acquisition catapults the risk specialist into the top three providers, along with FIS and Jack Henry, of regulatory reporting for U.S. domestic banks, and offers those banks improved risk management through the combination of both companies’ reporting products. The deal gives Lombard over 250 clients around the world for bank regulatory reporting.

John Wisbey, CEO of Lombard Risk, says: “This is an important strategic breakthrough for us, as it gives critical mass in the North American market place, both for foreign and domestic banks in the United States. We already had this for collateral management, but we now have it for regulatory reporting.”

Norris McLaughlin Represents Lombard Risk $4.25 Million Acquisition of SOFGEN Regulatory Reporting Business

• Korea Firm Courts Harrah’s for Cambodia Angkor Casino.  Korean development firm, Intercity Group, has invited Harrah’s Entertainment Inc. and MGM Resorts International, two of the world’s largest casino owners, to the site of the new Cambodia Angkor Casino. Intercity’s vice president, James Cho, said he would like to present Harrah’s and MGM with management operations deals. The casino will offer an alternative to the more established centers, such as those in Singapore and Macau. Still, however, the current economic situation may make it difficult for Intercity to find the funds for such a large scale project, which could make Harrah’s and MGM hesitant to strike a deal.
• Europe to Investigate Anti-Trust Complaints Over IBM Mainframes.  The European Commission has launched an investigation into IBM’s potential abuse of its dominance in the computer mainframe industry. The commission is going to assess whether IBM shut out competition from other mainframe producers or service providers by illegally tying sales of its mainframe operating systems to its mainframe hardware. A second investigation, which the commission has stated it will also set up, will examine whether IBM has delayed the sale of spare parts to block potential rivals from performing mainframe maintenance. With many complaints like these coming from small rival firms, IBM could face potential charges and serious fines.
• GM, Eclipsed at Home, Soars to Top in China.  While the U.S.’s once prosperous General Motors is slowly declining at home, in China, its sales and profits are rapidly rising. GM entered China a mere 13 years ago and already the country’s sales account for a quarter of GM’s total global sales. Part of GM’s success in China stems from the fact that its products do not carry the skepticism found among American consumers. Chinese consumers take the car for face value, and due to the psychology of the Chinese car market which has arisen from years of scarcity, buyers are not inclined to haggle the price. As the company’s sales plummet at home, GM says it will continue to take advantage of China’s potential and projects to sell 3 million automobiles annually in China by 2015.
• Pace to Buy U.S. Broadband Company.  U.K.-based Pace PLC, the world’s largest developer of cable and satellite television boxes, is set to buy U.S. broadband technology firm, 2Wire. Pace representatives say this deal will expand its customer reach into the telecom market. Since 2Wire already has established relationships with the top North American telecom providers, namely AT&T, it will make it easier for Pace to address and meet the U.S. operator requirements. The buy will cost Pace around $475 million, but also give them the ability to move into the global telecommunications market.
• U.K. Girds for New U.S. Fast Food Invasion.  Taco Bell, Chipotle, and Ruby Tuesdays, food chains well-known to just about every American are making the move across the pond into the U.K.  The U.K. food market is an attractive place for U.S. food chains since the “eating-out” culture is so established. Since the food services industry in the U.K. is so dynamic, diners readily welcome diversity and options. More specifically, the U.K. market is lacking in Mexican food options, an advantage for Taco Bell and Chipotle. Though the U.K. food market fell by 1.4% in 2009, it is predicted to grow by 4% this year.  U.S. food chains are looking to contribute to the growth.

^{Compiled and summarized by Aylin S. Khor}

• Boeing Gets Order for Up to 30 Jets From Dubai.  Emirates Airline of Dubai, the largest Arab airline, has placed an order for thirty commercial 777 jets from American aviation giant Boeing. The transaction which is estimated to be worth about $7 billion, further bolsters airlines’ confidence in Boeing’s jets and shows the start of the recovery of the airline industry. Airbus, Boeing’s European rival, and Boeing both projected that commercial air traffic will regain its growth over the next couple years. However, this deal proves that this new growth and need for more airplanes will be fastest and strongest in the Middle East and China.
• Google 1, LVMH 0.  In a world where technology is continuously advancing, companies are finding themselves faced with intellectual property issues and disputes. Google allows advertisers to bid on small text ad terms, regardless of whether or not the bidders own the trademark. However, LVMH, the French company that owns Louis Vuitton, said that allowing companies to bid on terms containing “Louis Vuitton” was a trademark infringement. The French court initially voted in favor of LVMH, but has now reversed the ruling to be in favor of Google. If the decision had stayed, Google could have faced serious administrative and financial problems.
• European Regulators Go After Google.  Skeptical European regulators have always had a fear of “bigness,” which they exemplified in the past anti-trust examinations of Microsoft.  Today, however, they are going after the heart of Google, its advertising business of AdWords text. Google has always kept it a secret as to how it decides which advertising strategies to utilize for its services. Now, however, French regulators have sided with a French GPS location company, requiring Google to reactivate the company’s account, which previously had been shut down. This seems to be the beginning of regulators’ attempts to make Google’s advertising system and procedures more transparent.
• New BNY Mellon CEO Seeks More Deals, Hires.  Bank of New York Mellon Wealth Management is looking for more deals and hires in various markets across the U.S. and the world. Chief Executive Lawrence Hughes says he intends to expand organically by increasing BNY Mellon’s existing sales force, and to expand through acquisitions in strategic markets. BNY recently acquired the Canadian investment advisor, I(3) Advisors, to further extend global expansion. The company is also seeking to increase hiring in countries where their asset management and investment services are already established, such as Brazil and China. The company has seen 17 consecutive quarters of growth, something Hughes says has been aided by BNY’s expansions over the past 19 years.
• Toyota Settles Infringements Case of Hybrid Patent.  Japanese car maker, Toyota Motor Corp., has settled a patent-infringement dispute through an agreement with Paice LLC, as hearings were to begin on a claim against Toyota by the U.S. International Trade Commission (ITC). Alex Severinsky, founder of Paice, said that his 1994 patented system for powering electric hybrid cars was taken and used by Toyota without his permission. The ITC is set up to eliminate unfair trade practices, and when a violation occurs, it can ban the product, a decision that if made would cause severe financial damage to Toyota. On the other hand, the ITC must also see whether Severinsky has the right to protect or be reimbursed for the millions of dollars invested in his patented invention. 

^{Compiled and summarized by Aylin S. Khor}

A foreign business seeking to enter the United States market faces many business and legal hurdles notwithstanding that it may have a better mouse trap or service to sell.  In what form should it enter the U.S. Market? Should it establish a direct branch operation? Should it form a separate legal subsidiary?  If so, should that subsidiary be a corporation or a limited liability company?  Should it enter into a joint venture with an existing U.S. partner or a foreign partner?  There are many options.  How will those choices affect the foreign company’s business risk, legal risk, tax cost and repatriation of profits?  This blog entry seeks to provide a general discussion of some of the choice of U.S. entity questions and the related business and tax issues. 

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