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As Mega-Mergers Fall Apart Deal Scrapheap Starts to Fill Up

As Mega-Mergers Fall Apart Deal Scrapheap Starts to Fill Up
The junkyard for scrapped deals is getting crowded.
According to data compiled by Bloomberg about nine percent of the $3.2 trillion in deals announced in the past eight months -- worth $294 billion -- have already fallen apart.
Despite overall deal volumes only ticking up about 23 percent, the scarraped deals are double the amount in the same period a year earlier.
While several multi-billion dollar transactions have also failed to make it over the finish line, the biggest reason for scrapped deals is being accorded to the collapse of the biggest pharmaceutical deal of all time.
We take a look at some of the biggest deals scrapped in the aforesaid period.
Pfizer — Allergan: $160 Billion
After U.S. officials cracked down on deals designed to reap tax savings for the companies involved, the drugmakers walked away from their $160 billion merger earlier this month. the planned mega-merger would have been the largest-ever deal in the pharmaceutical industry  had it succeeded. Ireland, which has a much lower corporate tax rate than the U.S would have become the tax address for Pfizer Inc.
According to  estimates from consultants Freeman & Co, cancelling the deal cost Pfizer about $150 million in termination fees -- and meant financial advisers to the companies missed out on $236 million payday.
Canadian Pacific — Norfolk Southern: $27 Billion 
After five months of public wrangling over the deal, the bid to buy Norfolk Southern Corp by Canadian Pacific Railway Ltd. was abandoned. Since regulators changed the rules on mergers for the industry in 2001, the deal, valued at $27 billion, would have been the biggest railroad deal.
While the Canadian Pacific investor Pershing Square Capital Management  was  keen on a combination, its offer was inadequate, and unlikely to pass regulatory scrutiny, Norfolk said.
Vonovia — Deutsche Wohnen: $9 Billion 
Not enough shares could be garnered by German property company Vonovia SE to support its $9 billion acquisition of rival Deutsche Wohnen SE. The deal feel apart in February after it secured just 30.4 percent of the 50 percent it needed to succeed.
The deal would have cemented Vonovia's position as Europe's largest publicly traded homeowner even as several Deutsche Wohnen shareholders had spoken out against the combination.
It would have been the biggest-ever deal in Germany's real estate industry. 
Anbang — Starwood: $14 Billion 
Ending a takeover battle with Marriott International Inc, a $14 billion offer to buy Starwood Hotels & Resorts Worldwide Inc. was withdrawn by an investor group led by China's Anbang Insurance Group Co. last month.
Four months after the hotel group had inked a deal with Marriott and  three weeks after surprising the market with an offer for Starwood, Anbang withdrew its bid.
Orange — Bouygues: $11 Billion 
A tie-up between Orange SA and the phone business of Bouygues SA -- collapsed on April 1 after months of negotiations. Bouygues said in a statement that employee guarantees, valuation and execution risk were the areas of concern which led to the breakdown of the talks about the combination.
Origin — Affymetrix: $1.5 billion 
After its target recommended a lower bid because of concerns over regulatory approval, Origin Technologies Corp. withdrew its offer for DNA-testing company Affymetrix Inc.
Backed by a Chinese investment firm, former Affymetrix executives created Origin to try and take the company private. Affymetrix instead opted for a lower bid -- $14 a share compared to Origin's $17-a-share offer -- from  Thermo Fisher Scientific Inc.

Christopher J. Mitchell

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