Until D.C. says no: U.S. companies hunt overseas
USA TODAY
Medtronic’s (MDT)[1] $43 billion buyout of Ireland rival Covidien (COV)[2] is the latest example of how U.S. companies are quickly buying up companies in low-tax countries before lawmakers put an end to it.
There have been a number of so-called “tax inversion” deals where U.S. companies buy companies in other countries where taxes are lower. Other companies to propose deals that appear to have the same motives include Walgreen (WAG)[3], Starwood Hotels (HOT)[4] and Pfizer (PFE)[5], says stock research firm FBR.
Expect a rush of more deals before lawmakers attempt to put an end to them, FBR says. Companies that could benefit from tax inversions while they’re allowed include computer chipmakers Texas Instruments (TXN)[6], Broadcom (BRCM)[7] and Nvidia (NVDA)[8], FBR says. A possible target could include foreign computer chip designer ARM Holdings, FBR says.
Tax inversions are increasingly popular with U.S. companies because they are a way to cut the tax bill without moving the corporate headquarters. Companies like Apple (AAPL)[9] have demonstrated the great economic benefit to using an overseas operation as a way to shield profit from U.S. tax rates.
Washington isn’t pleased. President Obama’s proposed 2015 budget contains some language that makes these deals less attractive, FBR says. Democrats in the House and Senate have also introduced legislation intended to fight inversions, FBR says. Republicans, too, are looking to end the loophole, but as part of broader reforms.
The one deal often pointed to for kicking off the trend was the 2010 pharmaceutical combination of Valeant and Biovail, FBR says.
References
- ^ Medtronic’s (MDT) (www.usatoday.com)
- ^ Covidien (COV) (www.usatoday.com)
- ^ Walgreen (WAG) (www.usatoday.com)
- ^ Starwood Hotels (HOT) (www.usatoday.com)
- ^ Pfizer (PFE) (www.usatoday.com)
- ^ Texas Instruments (TXN) (www.usatoday.com)
- ^ Broadcom (BRCM) (www.usatoday.com)
- ^ Nvidia (NVDA) (www.usatoday.com)
- ^ Apple (AAPL) (www.usatoday.com)