How ViacomCBS Used International Tax Shelters to Save Billions - The New York Times

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More on the study that says ViacomCBS used international tax networks to cut its bill.

Of tax shelters and ‘Transformers’

Our Times colleague Ed Lee, who wrote about a study finding that ViacomCBS used overseas tax shelters to avoid paying billions in U.S. taxes, goes deeper into the story for us:

Every multinational takes advantage of tax shelters, but the way ViacomCBS does it is particularly fascinating. The company behind the “SpongeBob,” “Mission Impossible” and “Transformers” franchises has avoided paying $4 billion in U.S. corporate income tax since 2002, according to a study from a Dutch nonprofit.

The report focused on how ViacomCBS exploited mismatches between tax codes across different regions when licensing its TV shows and films — made mostly in the U.S. — overseas. The arrangements appear to be legal; ViacomCBS has disputed the study as “deeply flawed and misleading” and said that it “fulfills its tax obligations in all 180-plus countries and the territories” in which it operates, and that all its revenues “are fully taxed in relevant jurisdictions around the world, including the United States, as required by applicable law.”

One of the study’s authors, Maarten Hietland, told me that “no research has specifically focused on the role of companies heavily relying on I.P.,” referring to intellectual property. Unlike companies that rely on physical goods, a media business like ViacomCBS can transfer the foreign rights to “Transformers” like flipping a switch.

The Trump administration tried to tackle the issue in its 2017 overhaul of the tax code, but ViacomCBS was able to get around some of those rules through an even more elaborate system. (The Biden administration is taking its own crack at the problem.)

Here’s how one tactic worked, according to the study:

Viacom shifted international licensing rights from its Dutch subsidiary to its British subsidiary. The transfer — essentially a sale from one ViacomCBS subsidiary to another — created a tax benefit, since the transaction was worth $1.8 billion, a sum that could be amortized over many years.

When it comes to clever tax plans and deals, we tend to think of instances like John Malone’s intricately designed projects — but we often don’t consider the many smaller transactions that find their way around such systems. And $4 billion is still a lot of money, even if it’s happening in million-dollar increments.

HERE’S WHAT’S HAPPENING

The S.E.C. accused Elon Musk of violating a settlement, letters show. In correspondence to Tesla in 2019 and 2020, the agency said the company hadn’t followed court-ordered procedures for preapproving Musk’s tweets about solar panel production and the carmaker’s stock price, The Wall Street Journal reports.

President Biden suspends Arctic drilling leases. The move to halt drilling in the Arctic National Wildlife Refuge in Alaska undoes a signature energy policy of the Trump administration, pending an environmental and legal review. Separately, as oil prices rise, OPEC and Russia agreed to gradually ease production curbs they adopted in April.

European countries issue digital vaccine passports. Seven nations began offering what they call a digital green certificate yesterday to ease travel within the E.U., with the rest of the bloc adopting it by next month. In other inoculation news, Moderna has applied for full U.S. authorization of its vaccine.

A hedge fund flips AMC stock. Mudrick Capital bought $230.5 million worth of newly issued shares in the movie theater chain beloved by internet traders yesterday — and within hours sold them at a profit. The reason: Mudrick believed AMC’s shares, which rose 23 percent yesterday alone, are overvalued.

Meet the new Warner Bros. When the deal merging AT&T’s WarnerMedia and Discovery closes, the newly combined business will be called Warner Bros. Discovery. Meanwhile, in a regulatory filing, AT&T spent time defending its initial $85 billion takeover of Time Warner: “The strategy behind the acquisition was sound,” AT&T wrote, going on to list the benefits of the frequently criticized transaction.

The latest ransomware attack target: meat

Cybercriminals yesterday forced the meat-processing giant JBS to shutter nine U.S. beef plants and disrupted some of the company’s poultry and pork facilities. It’s another reminder that companies core to the nation’s basic functions remain under threat from ransomware, just weeks after a major gas pipeline was shut for days.

Meat prices are at risk. Bloomberg notes that the U.S. Department of Agriculture was forced to delay releasing wholesale beef and pork prices yesterday. And while JBS said it expected most of its plants to reopen today, analysts warned that even one day’s disruption could “significantly impact” wholesale beef prices.

Russian hackers are suspected in the attack, a White House official said. In the Colonial Pipeline attack, a Russian-speaking gang known as DarkSide took responsibility and disbanded shortly afterward, though the pipeline company paid $4.4 million to recover its data.

It isn’t clear whether JBS has paid ransom.

Inside At Home’s sales process

Just over a week after At Home agreed last month to sell itself to the private equity firm Hellman & Friedman for about $2.4 billion, the décor superstore’s largest shareholder, CAS Investment Partners, publicly opposed the deal, arguing it was “grossly” undervalued. At the heart of the dispute is how to value a company that got a pandemic bounce, but may soon face a new reality. At Home filed its proxy statement today, offering an in-depth look at how it’s grappling with these dynamics — and DealBook got an early look.

At Home has been exploring a sale since 2019, hoping to cull its costs away from the glare of the stock market.

The pandemic halted those efforts, and At Home’s stock price plunged below $2 a share. But homebound shoppers pushed up net sales by nearly 50 percent in its third quarter — and its share price rose, too. At Home restarted the sales process in November.

In March, when At Home’s stock was trading at around $28 a share, Hellman & Friedman and another unnamed private equity firm jointly bid $32 a share. Talks continued as At Home’s rebound continued — the company twice updated its projections — prompting Hellman & Friedman to raise its offer five times. (The other firm dropped out after bidding surpassed $32.)
Hellman finally offered $36 a share, up 17 percent from where At Home’s stock traded before the deal talks leaked. Today, its shares are trading a little above that, likely on shareholders’ hopes of a higher offer.

The question is how much At Home’s business will continue to grow. CAS thinks the company could be worth more than $135 a share by the end of its 2026 fiscal year, and that the right sale price is therefore over $70 a share — a roughly 128 percent premium.

But At Home is worried that shoppers will revert to pre-Covid habits. Other retailers whose businesses jumped during the pandemic have disappointed investors: Shares of Home Depot dipped last month despite smashing expectations, and that company declined to provide financial guidance for next year. The Container Store also saw its shares fall last month despite topping expectations, and is similarly withholding guidance.

Meanwhile, At Home is looking for other buyers. As part of the Hellman deal’s go-shop provision, the retailer has reached out to 17 financial sponsors and seven companies. So far, just one — an investment firm — has signed a nondisclosure agreement, though it has yet to make an offer.

“I genuflect to no one but science and always, always speak my mind when it comes to public health.”

— Dr. Anthony Fauci, in an email to the epidemiologist Gregg Gonsalves in March 2020. BuzzFeed News obtained 3,200 pages worth of Fauci’s emails, covering the first part of the pandemic.

More on mental health on the tennis court

Yesterday, we wrote about Naomi Osaka’s decision to withdraw from the French Open, citing concerns for her mental health. The move followed a dispute with tournament officials over Osaka’s bypassing of news conferences, which she had previously said exacerbated her anxiety. It underscored an increasing awareness of mental health in the workplace, and started a conversation about what’s to be done when tasks that pose risks to mental health are part of the job.

DealBook readers had a lot to say; here’s a sample. (They have been edited and condensed for clarity.)

“Tournament participants benefit from media exposure, so those who are comfortable with it will do it. For those who are not comfortable with it, forcing them to choose between compromising their health, along with their competitiveness, and withdrawing from participation is just plain wrong.” — John Gerling, Modesto, Calif.

“There are lots of things about my job I don’t like, and lots of things I do. If I choose not to do the tasks I don’t like, I lose my job. That’s the way it goes.” — Brian Parker, London

“She’s an athlete, not Kim Kardashian. It should have never gotten to the point where she felt it necessary to discuss her depression and anxiety publicly, although I applaud her courage in doing so.” — Julia Griffin, New York

“Any endeavor has ‘must have’ and ‘nice to have’ skills. Speaking to the media does not seem a ‘must have’ skill for athletes. Those who don’t want or can’t do it should not be banned from the sports business.” — Bill Perlstein, Rehoboth Beach, Del.

“There has to be an alternative option for Osaka to fulfill her obligations. No one should ever have to participate in an activity that they feel is detrimental to their wellbeing.” — Guy Conners, Wake Forest, N.C.

THE SPEED READ

Deals

As SPACs remain under pressure from regulators and their stock prices sink, they’re finding it harder to find merger partners. And here’s how Michael Milken became a big investor in blank-check funds. (WSJ, Forbes)
Etsy agreed to buy Depop, the used-clothing site beloved by Generation Z, for $1.6 billion. (NYT)
“I Wrote James Bond Movies. The Amazon-MGM Deal Gives Me Chills.” (NYT Opinion)

Politics and policy

Gov. Andrew Cuomo of New York plans to hold a $10,000-a-head fund-raiser this month, despite an investigation into allegations of sexual harassment and abuse of office. (Bloomberg)
Randy Quarles, one of the Fed’s top officials, suggested he might stay as a governor after his term as vice chair for supervision ends in October. (NYT)

Tech

Amazon unexpectedly changed its terms of service to let customers sue, instead of forcing them into arbitration for disputes. (WSJ)
Katerra, the troubled construction start-up backed by SoftBank, is shutting down. (Information)

Best of the rest

Try to follow along: Because of a state law that the Legislature ran out of time to change, Tesla needs to ship the vehicles it makes in Texas out of state before it can bring them back to sell. (Drive)
Four N.B.A. stars are among the 150 Black and Latino investors backing a $1 billion real-estate project for Harvard. (WSJ)
“Can I Ask Co-Workers if They’ve Had the Covid Vaccine?” (NYT Magazine)

We’d like your feedback! Please email thoughts and suggestions to dealbook@nytimes.com.

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