Business this week

Pfizer, the drug company behind Viagra, and Allergan, which makes Botox, agreed to combine in a $160 billion deal, the biggest to date in the pharmaceuticals industry. Both companies conduct most of their business in America, though the complex merger will enable Pfizer to move its tax base to Ireland—where Allergan has its corporate headquarters—thus significantly reducing its American tax bill. Such acquisitions have whipped up a political storm in America. But Ian Read, Pfizer’s chief executive, said the merger would make it more competitive globally. See article.

Roiled-Royce

Rolls-Royce unveiled a restructuring plan to shore up investor confidence following five profit warnings. The British engineering company will shed more jobs and streamline management in response to falling demand for jet-engine maintenance and the turbines it supplies to the offshore energy industry. Warren East, the company’s boss, didn’t rule out a sixth profit warning, cautioning that the short-term outlook “is not as solid as I would like it to be”.

National bank deposit-insurance arrangements among the euro zone’s 19 countries should be replaced with a joint system to cover the currency bloc, according to the European Commission, which proposed a scheme that would protect savings of up to €100,000 ($106,000) if a bank collapses. It says the scheme is needed to underpin a banking union, but Germany opposes any notion of pooling more financial risk with other countries. See article.

The Dutch government floated 20% of the stake it holds in ABN AMRO, seven years after the bank was bailed out during the financial crisis. ABN AMRO was priced at €17.75 ($18.80) a share upon its stockmarket debut, valuing it at €16.7 billion. It is the biggest banking IPO in Europe since 2007.

Italy’s central bank helped to create a largely private fund that allows the government to rescue four ailing banks and hive off their poorly performing assets into a “bad bank”. It seems to have acted now to spare senior bondholders any losses. From January, new European rules will require senior bondholders to share the cost of bank rescues, along with shareholders and more junior creditors. See article.

A long-running battle over the world’s largest undeveloped iron-ore deposit, in Guinea, took a twist in New York. A federal court threw out a racketeering lawsuit brought by Rio Tinto, an Anglo-Australian mining giant, against Vale, a Brazilian rival, and BSGR, which is linked to Beny Steinmetz, an Israeli billionaire, because of arguments over the legal niceties. Rio had alleged that the two companies had connived, with help from corrupt officials, to steal its rights to dig at Simandou. BSGR remains caught up in related bribery investigations in America and Switzerland. It has denied any wrongdoing.

America’s economic-growth rate was revised upwards to 2.1% in the third quarter at an annual rate, from 1.5% in an earlier estimate. The revision was mostly because businesses held higher levels of inventories than had been thought. The growth in consumer spending was revised down a bit but was still robust at 3%.

Back down to earth

Li Ka-shing, Hong Kong’s richest man, who is nicknamed “Superman” because of his business prowess, was handed a rare setback. Mr Li is restructuring his business empire in order to pivot his investments away from China and towards Europe and Australia. But in a show of defiance, independent shareholders in a subsidiary of his Cheung Kong Infrastructure group voted down a proposal to merge with the parent company, following advice that the offer was too mean. See article.

Carl Icahn, an activist investor, raised the pressure on American International Group to consider his proposal that the insurer split in three, by warning that he intends to take his plan directly to shareholders. AIG reiterated its position that Mr Icahn’s idea makes no financial sense.

In a closely watched stockmarket flotation that may help understand the true valuation of Silicon Valley’s “unicorn” startups, Square’s share price rose by 45% to close at $13.07 on its first day of trading, but only after pricing its IPO at $9 a share, below the range of $11-13 that it had hoped for. In trading over subsequent days Square’s share price fell back.

Used rocket: one careful owner

Blue Origin, a space startup owned by Jeff Bezos, the founder of Amazon, successfully launched the world’s first reusable rocket, which launched a test spacecraft that could eventually bring tourists to the edge of space. The capsule returned safely to ground, as did its BE-3 rocket booster. Space rockets usually break up when re-entering the atmosphere. Having a reusable one will cut the cost of space flight. See article.