Industrial logic

22 May 2014 By Kevin Allison

Juiced up on drug deals that promise big tax savings, like Pfizer’s bid for Astra, bankers are pitching copycat transactions before Congress gets wise. Tyco, Ingersoll-Rand and Pentair went abroad during a previous exodus and may tempt acquirers seeking inversions of their own.

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A bill introduced by Michigan Senator Carl Levin would crack down on the practice – known as an “inversion” – by requiring an overseas company’s shareholders to hold at least 50 percent of the shares in the merged company, up from the current requirement of 20 percent, in order to avoid a big tax hit from moving overseas.

The measure also calls for companies whose management stays in the United States, or that have more than 25 percent of their employees or sales in the country, to continue to be treated as domestic companies for tax purposes. House Democrats introduced a similar measure on May 20.

Ingersoll-Rand is based in Swords, Ireland. Pentair is based in Schaffhausen, Switzerland. Tyco International on May 2 announced plans to shift its domicile to Ireland from Switzerland, citing recent Swiss laws capping executive pay and tightening immigration rules. Pentair shareholders on May 20 approved a similar move to Ireland.

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