Microsoft To Fund Nokia Acquisition With $60 Billion In Offshore Holdings

Quartz:

Microsoft’s $7.2 billion deal for most of struggling Finnish phone manufacturer Nokia lessens the load of an unlikely burden—a surplus of overseas cash. Microsoft will pay for the acquisition entirely in cash from its $60 billion in offshore holdings.

Microsoft and other US-based multinational giants, particularly technology companies, have been under fire for the huge amount of cash they hold overseas instead of repatriating it, where it would be subject to clutches of the Internal Revenue Service. At the end of 2012, Microsoft held 89% of its over $68 billion in cash overseas, second only to Apple, which had 69% of its $137 billion offshore. The St. Louis Federal Reserve said in a January report that the cash hoarding helps to explain the US’s slow recovery from the recession.

Microsoft shifted some $21 billion overseas between 2009 and 2011 and managed to avoid paying $4.5 billion in taxes on goods sold in the US, according to a US Senate committee report, by the aggressive use of a tax strategy known as “transfer pricing.” The report said Microsoft also transferred royalty income to low-tax countries like Singapore and Ireland, including one unit that was headquartered in Bermuda and had no employees.

For many of the workers in Espoo, Finland, the deal is sure to be a relief, especially after Nokia’s chief executive compared their position to an offshore oil worker standing on a “burning platform” with “multiple points of scorching heat that are fueling a blazing fire around us.” And happily for Microsoft, Finland is planning to cut its corporate tax rate to 20% from 24.5% to attract new business.

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Arby’s And Wendy’s

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Bank Of America And Countrywide

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Kmart And Sears

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eBay And Skype

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AOL And Time Warner

In 2000, AOL announced that it was buying Time Warner for $160 billion<a href=”http://news.cnet.com/2100-1023-235400.html”> to create the “world’s largest media company,”</a> according to CNET. The combination didn’t last long. In 2009, <a href=”http://news.cnet.com/8301-1023_3-10250944-93.html”>Time Warner separated entirely from AOL</a>. Jerry Levin, who sold Time Warner to AOL, later told CNBC,<a href=”http://www.telegraph.co.uk/finance/businesslatestnews/6937916/The-shortlist-for-worst-takeover-of-the-century.html”> “I presided over the worst deal of the century, apparently.” </a>

AOL agreed to acquire The Huffington Post in February 2011.
Sprint And Nextel

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Quaker And Snapple

Quaker acquired Snapple in 1994 for $1.7 billion. Just 27 months later, <a href=”http://articles.latimes.com/1997-03-28/business/fi-42931_1_quaker-bought-snapple”>Quaker sold the company for $300 million</a>.
Daimler-Benz And Chrysler

In 1998, Daimler-Benz bought Chrysler <a href=”http://www.time.com/time/specials/packages/article/0,28804,1894731_1894734_1894722,00.html”>for $36 billion</a>. Ultimately, Chrysler’s focus on accommodating customers with lower incomes did not fit with Daimler-Benz’s luxury car making business model. In 2007, Daimler-Benz paid <a href=”http://www.time.com/time/specials/packages/article/0,28804,1894731_1894734_1894722,00.html”>$650 million to Cerberus Capital Management </a>to sever its ties with Chrysler, according to Time.
New York Central And Pennsylvania Railroads

New York Central Railroad <a href=”http://www.ibtimes.com/grand-central-terminal-100-centennial-celebration-made-possible-jackie-kennedy-onassis-1056046″>merged with Pennsylvania Railroads in 1968 to avoid bankruptcy</a>. The former rivals came together to create Penn Central only to <a href=”http://www.american-rails.com/penn-central.html”>fall apart and file for bankruptcy just two years later</a>.