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Obama Cracks Down on Inversions

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Corporate+Tax+Inversions

I like this Obama. Can we reelect him this fall?

The drug giant Pfizer wanted to cut its taxes through a $152 billion takeover of the Dublin-based maker of Botox. And Halliburton sought to buy a major rival in the business of selling equipment to oil drillers for nearly $35 billion.

But this week, the Obama administration took on both deals — and it has claimed at least one trophy so far.

Pfizer walked away from its proposed merger with Allergan on Wednesday, complaining that new tax rules from the Treasury Department sharply curtailed the benefits of that deal.

And the Justice Department sued Halliburton and Baker Hughes on Wednesday, arguing that putting the two together would cut competition in the oil field services industry to unacceptable levels. The two companies plan to fight the suit.

In both cases, the administration showed how it has been increasingly willing to challenge giant takeovers, reflecting a belief that the corporate world goes too far in its pursuit of megamergers.

“The concern we have is the leaders of some corporations who are looking to take the best of America without making a contribution to the success of our country,” Josh Earnest, the White House press secretary, said on Wednesday when asked about Pfizer and Allergan. “That’s wrong.”

The government’s challenges raise questions about the strength of what had appeared to be a surging market for mergers, particularly after a banner year in 2015. Transactions valued at about $4.7 trillion were announced last year, according to Thomson Reuters data, smashing records.

Recent moves by the administration, though, are already tempering plans for big, risky transactions, lawyers and bankers say. Monsanto, which last year had pursued a failed takeover of a rival that analysts cautioned could draw antitrust scrutiny, told investors on Wednesday that it was abandoning “large-scale” mergers as a strategy.

“A board that’s considering a transaction has to reassess what are the outer limits of what the government is prepared to do,” said Richard Brand, a mergers and acquisitions partner at Cadwalader, Wickersham & Taft. “If it’s a politically unpopular transaction and the government has the tools to block it, they might block it just because they can.”

Stopping inversions that become just another way to increase shareholder profit at the expense of the American people is precisely what the government should be doing. I am very glad to see Obama use his powers to fight it.

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