OCI OCI NV

   (FROM THE WALL STREET JOURNAL 11/25/15) 
   By Liz Hoffman 

It isn't boring to be a tax attorney these days.

Just ask the team at Skadden, Arps, Slate, Meagher & Flom LLP working on Pfizer Inc.'s $155 billion deal with Allergan PLC. Their immediate task is getting the biggest tax-lowering merger in history past U.S. authorities.

Meanwhile, they are facing off with the Internal Revenue Service to get tax-free treatment for Yahoo Inc.'s spinoff of its $20 billion stake in Alibaba Group Holding Ltd. -- an effort the agency dealt a setback in September -- as well as shepherding a pair of other big transactions that would move U.S. companies overseas.

The deals have landed Skadden in the middle of an election-year debate about U.S. tax policy and corporate tax planning, with billions of dollars riding on the firm's efforts.

"It does seem like they are involved in all of the really difficult and controversial deals," said Robert Willens, an independent tax analyst. "They have a great reputation in the tax area, but if they are found to be wrong on one or two, they go from looking aggressive and smart," he cautioned, "to just looking aggressive."

The merger announced Monday would move Pfizer's legal home to Ireland, cutting its tax rate to about 17% from about 25% and giving the company the ability to use the cash it has generated overseas without paying hefty taxes.

It came just four days after U.S. regulators released new guidelines to discourage inversions, their second attempt in 14 months to deter transactions with foreign companies that can be used to move U.S. corporations into lower tax jurisdictions overseas.

The new rules, which are narrowly written, are unlikely to derail the Pfizer-Allergan deal. But they put the 166-year-old drug company and its advisers squarely at odds with regulators.

Last week, Treasury Secretary Jacob Lew blamed "creative accountants and lawyers" for helping U.S. companies sidestep taxes.

A Skadden spokeswoman declined to comment.

Wachtell, Lipton, Rosen & Katz was the lead M&A adviser to Pfizer, taking a role long held by Skadden.

Skadden's lawyers played a role in the boom in inversions. In 2010, a group of Skadden lawyers from New York and London brainstormed ways to rev up the sluggish deals market as they biked through southern France, The Wall Street Journal has reported. They dusted off the idea of inversions, which had been around for years but sparingly used. After they returned, they started pitching ideas to banks, opening up a lucrative line of business.

Since 2013, Skadden has advised on 12 of 28 proposed inversion deals valued at about $430 billion, representing about 72% of such transactions by dollar value, according to Thomson Reuters. Skadden was the lead adviser to Pfizer on its unsuccessful courtship of AstraZeneca PLC, another would-be inversion. It also advised U.S. drug firm AbbVie Inc. on the tax and financing aspects of its $54 billion acquisition of Ireland's Shire PLC. That deal collapsed in October 2014 after the Treasury's first attempt to discourage inversions.

The firm is working on a number of other deals that, in one way or another, could test the limits of tax law and the patience of regulators.

In addition to Yahoo, Skadden is representing Darden Restaurants Inc. on the separation of its real estate, chip maker Broadcom Corp. on its $37 billion sale to Singapore's Avago Technologies Ltd., and fertilizer maker CF Industries Holdings Inc.'s purchase of Dutch rival OCI NV.

Some of Skadden's pursuits have gone well. Darden, the owner of the Olive Garden chain, received the IRS's blessing for its real-estate spinoff, despite comments from the agency that it was concerned about such transactions.

The jury still is out on others. In the Yahoo deal, Skadden delivered an opinion that said Yahoo's spinoff of its Alibaba stake would satisfy the government's requirements to be tax-free. But when the technology company sought an IRS ruling to that effect, the agency declined to grant one. The same is true of the pending sale of Skadden client Broadcom to Avago. Both deals may ultimately end up being deemed tax-free.

Pfizer CEO Ian Read had been pursuing a tax inversion since the attempted merger with AstraZeneca last year.

The company set its sights on Dublin-based Allergan, which, through a series of acquisitions, had become big enough to serve as an inversion target for the behemoth Pfizer.

When the Treasury released the guidance at 5 p.m. last Thursday, lawyers on both sides pored over the notice and by late evening had come to the same conclusion: The deal was safe.

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Shayndi Raice contributed to this article.

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(END) Dow Jones Newswires

November 25, 2015 02:47 ET (07:47 GMT)

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