Mt. Gox granted Chapter 15 protection

BY Matt Atkins

Mt. Gox, the infamous Tokyo-based bitcoin exchange, has gained court approval to start Chapter 15 bankruptcy proceedings in the US. The development should prove a boost to a Japanese investigation into the loss of 650,000 units of the digital currency, and pave the way for the company to complete the sale of its business.

Once the leading bitcoin exchange, Mt. Gox was forced to cease trading and close down its website in February 2014 when the company lost 700,00 of its customers' bitcoins, along with 100,000 of its own, worth an estimated $473m. Mt. Gox blamed a prolonged hacking attack for the loss, though it subsequently found 200,000 bitcoins in an old-format digital wallet.

Mt. Gox sought court protection in Japan in February. The Japanese court put the company into liquidation in April and appointed a trustee to investigate the disappearance of the bitcoins. The exchange applied for Chapter 15 protection in the US on 19 March to prevent US customers who had filed a class action lawsuit from seizing its US assets and demanding evidence from executives. US Bankruptcy Judge Stacey G. Jernigan said, on 17 June, that she has “ample legal authority” to accept the US filing and recognise Mt. Gox’s Japanese bankruptcy as the foreign main proceeding. US and Canadian customers will split the 200,000 bitcoins held by Mt. Gox and share in a 16.5 percent stake after Mt. Gox is sold.

Mt Gox began life as a website for users of Magic: The Gathering Online, allowing them to trade cards like stocks. In July 2010, the site was re-launched as an exchange for trading bitcoin and regular currencies. Its short life was chequered with security breaches, trading suspensions and lawsuits before its eventual collapse.

News: Failed bitcoin exchange Mt Gox gets US bankruptcy protection

Tax concerns secondary in medical mega-deal

BY Matt Atkins

The latest in a string of healthcare mega-deals has been driven by potential synergies rather than tax considerations, according to executives behind the transaction.

On 15 June, US medical device maker Medtronic Inc announced it had agreed to acquire Ireland’s Covidien Plc for $42.9bn in cash and stock. The purchase will see Medtronic move its executive base to Ireland, reducing its overall tax burden. However, a complimentary strategy with Covidien on medical technology has motivated the deal, rather than tax savings, says Medronic CEO, Omar Ishrak. “This acquisition will allow Medtronic to reach more patients, in more ways and in more places. Our expertise and portfolio of services will allow us to serve our customers more efficiently and better address the demands of the current healthcare marketplace.”

The acquisition of Covidien will significantly advance Medtronic’s position as a leader in medical technology and services. The combined company will have a comprehensive product portfolio, a diversified growth profile and broad geographic reach, with 87,000 employees in more than 150 countries. The deal will create a close competitor in size to the medical device business of industry leader Johnson & Johnson Co.

The deal has raised concerns surrounding the number of US firms striking deals that slash their tax bills. While historically quite rare, the acquisition of companies aimed at lowering corporate tax rates is becoming increasingly common. Pfizer’s recently failed bid for AstraZeneca, for instance, has served to refocus attention on so called ‘inversions’. Currently, two Congress bills, along with a White House proposal, are aiming to make the practice more difficult, though neither has gained much traction. This could change if further US firms try to exploit the loophole.

While the deal has sparked debate for all the wrong reasons, it has been welcomed by the Irish firm. “Covidien and Medtronic, when combined, will provide patients, physicians and hospitals with a compelling portfolio of offerings that will help improve care and surgical performance,” said José E. Almeida, Covidien's chairman, president and chief executive. “This transaction provides our shareholders with immediate value and the opportunity to participate in the significant upside potential of the combined organisation.”

The transaction has been approved by the boards of both companies.

Press release: Medtronic to Acquire Covidien for $42.9 billion in Cash and Stock

EU unveils merger simplification package

On 1 January 2014 the EC introduced key reforms to EC merger control rules, with the aim of reducing the information burden on companies, particularly for notification of non-complex mergers, and to streamline the pre-notification process. However, while the new rules will facilitate dealmaking in Europe, they will not in themselves increase the number of deals, and the EU Merger Regulation process will remain more complex and costly for simple transactions than other regimes.

FW spoke to Catriona Hatton at Baker Botts L.L.P., Davina Garrod at Bingham McCutcheon LLP and Ian Giles at Norton Rose Fulbright LLP, about European merger notification and control.

TalkingPoint: Changes to European merger notification and control

Intel loses EU fine challenge

BY Matt Atkins

US chipmaker Intel has failed to overturn a $1.44bn fine handed down by EU antitrust regulators five years ago.

In its 2009 decision, the European Commission found Intel guilty of giving rebates to selected PC manufacturers in return for buying their processor chips over those produced by rival Advanced Micro Devices (AMD). Intel is also said to have paid German retail chain Media Saturn Holding to exclusively stock computers powered by Intel chips. "The Commission demonstrated to the requisite legal standard that Intel attempted to conceal the anti-competitive nature of its practices and implemented a long term comprehensive strategy to foreclose AMD from the strategically most important sales channels," the court said.

Judges at the Luxembourg-based General Court backed the Commission's decision, saying the EU watchdog’s approach had not been heavy-handed, despite being the highest single antitrust penalty the authorities in Brussels have levied on a single company. The fine is equal to 4.15 percent of Intel's 2008 turnover, against a possible maximum of 10 percent. "The General Court considers that none of the arguments raised by Intel supports the conclusion that the fine imposed is disproportionate,” said judges. “On the contrary, it must be considered that fine is appropriate in the light of the facts of the case."

European regulators have emerged as some of the world’s staunchest enforcers of antitrust laws, particularly in the technology sector, stepping up their pursuit of violators in the late 2000s. The Intel ruling may be an early signal that global authorities are gearing up to pursue errant technology firms.

Intel contests that it has committed no wrongdoing, that its rebates and discounts were legal and a common way of rewarding companies for purchasing its products in large quantities. Going forward, the firm can take its case further to the Court of Justice of the European Union.

Press Release: Antitrust: Commission welcomes General Court judgment upholding its decision against Intel

Expansion expected in Healthcare BPO

BY Matt Atkins

According to a new report published by MarketsandMarkets, the global healthcare business process outsourcing (BPO) market is expected to see rapid growth in the next five years, doubling in size by 2018. Presently valued at an estimated $92.3bn, the market is poised to grow at a CAGR of 10.8 percent to reach approximately $188.9bn before the decade is out.

BPO is the contracting of specific business tasks such as payroll to third party services. Usually, BPO is implemented as a means of outsourcing  tasks that a company requires but does not depend upon to maintain its position in the marketplace.

The healthcare BPO market is spread across the payer, provider and pharmaceutical sectors, of which pharmaceuticals has the largest share, accounting for close to 80 percent of the market in 2013. Cost reduction is the main driver for outsourcing business functions which include HR services, finance and accounts, claims processing, medical billing and contract research. Healthcare reforms introduced by the Obama administration are also driving the market.

Healthcare BPO is divided into source and destination geographies. The US accounts for the largest share of the market, followed by Europe. The most preferred destination is India, which has the advantage of a high number of healthcare professionals, affordable cost of living, a large patient pool, and decreased time and costs for recruitment.

Overall, the healthcare BPO market is highly fragmented with many small players competing for their share, particularly in India and China, where many entrepreneurs have entered the market. The major players include Accenture, GeBBS Healthcare, Omega Healthcare, Parexel and Boehringer Ingelheim.

In recent years, the market has come under scrutiny by regulatory bodies, and regulatory change in key regions such as the US and Europe is expected to result in increased requirements for payer and provider outsourcing services.

Press Release: Healthcare BPO Market worth $188,856.5 Million by 2018