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Arthur Andersen in Zurich provided tax advice on the merger of Zurich Insurance and the financial services division of BAT Industries (for prior coverage see ITR Dec/Jan 1998, p6). Tax partners Peter Athanas and Maja Bauer-Balmelli worked on the Zurich Insurance side of the deal.

Société Générale has acquired Hambros Banking Group from Hambro in a deal worth £300 million ($483 million). The banking group includes Hambros bank and its subsidiaries and associates, together with shareholdings in certain other companies. Société Générale was advised by tax partner Francis Sandison at Freshfields in London. Norton Rose acted for Hambro. Tax advice came from partner Louise Higginbottom and assistants Dominic Stuttaford, Nick Stretch and Mark Middleditch.

Virgin has sold Virgin Radio to Ginger Media Holdings for £81 million ($130 million). Mark Joscelyne from law firm Olswang advised Ginger Media Holdings on tax. UK City firm Macfarlanes advised Virgin. Partner Ashley Greenbank was responsible for tax advice.

The US natural gas utility KN Energy is to acquire gas pipeline company Midcon Corporation from Occidental Petroleum. The deal is worth $3.49 billion. KN has already spent $1.5 billion on acquisitions since 1989. The transaction will provide KN with more than 41,600 kilometres of pipeline in 15 US states, and boost annual revenue to $4.7 billion.

US bank First American has made a successful $2.7 billion stock bid to acquire Deposit Guaranty. Wachtell, Lipton, Rosen & Katz in New York is acting for First American. Tax partner Adam Chinn is dealing with tax issues raised by the bid.

MascoTech is set to merge with TriMas Corporation, a manufacturer of industrial products. The transaction is valued at approximately $900 million. MascoTech already owns 37% of TriMas. The merged organization will have a combined sales volume of $1.6 billion.

The IRS has announced that it will not appeal against the US Tax Court's decision in the SDI Netherlands BV v Commissioner case. The court found that royalty payments made by the taxpayer for the use of software in the US, to a related company in Bermuda did not qualify as US source income. The finding was based on the fact that the royalty payments from SDI USA passed through SDI Netherlands before they reached the Bermuda company.

The US Internal Revenue Service (IRS) announced on January 16 1998 that it will clamp down on the use of hybrid branches that simultaneously reduce foreign tax and defer US tax. A number of US power companies engaged in overseas power projects use these entities. Offshore holding companies are formed for foreign investment, and the payment of US tax is deferred until earnings have been repatriated to the US. Since January 1997, US companies could check the box to ensure that foreign entities, with a single owner, were treated as transparent for US tax purposes.

The first budget statement delivered on December 3 1997 by the new minister for finance, Charlie McCreevy, was also the first budget to be delivered before the start of the financial year. The minister used the opportunity presented by very high economic growth rates, and the resulting tax buoyancy, to make a number of significant tax changes. The minister has confirmed that with effect from January 1 2006, the standard corporation tax rate applicable to the trading profits of non-manufacturing companies (including financial services companies operating in the Dublin docks area whose 10% tax rate expires on that date) will be 12.5%. A higher rate of 25% will apply to the non-trading income of those companies. Manufacturing companies will continue to benefit from the lower 10% manufacturing tax rate until it expires at the end of 2010.

Reed Elsevier is to dispose of its consumer magazine group IPC in a deal worth £860 million ($1.38 billion). The purchasing MBO group is financed by Cinven, with debt underwritten by Goldman Sachs. Freshfields acted for Reed Elsevier, with tax advice from partner Colin Hargreaves and manager Isabel de May.