September 7, 2014

Tax Inversion M&A: Westbury Group Again Quoted in Business Week

Bloomberg/Business Week again reached out to us for our perspective on the recent trend of tax inversion mergers.

Inversion Express Slows to Crawl as Obama Condemns CEOs

By Matthew Campbell, Manuel Baigorri and David Welch
Aug 24, 2014 9:49 PM ET

President Barack Obama’s full-throated denunciation of overseas mergers that lower U.S. companies’ taxes is throwing cold water on potential deals. On July 24 Obama referred to companies looking to shift their domicile as “corporate deserters” and aides pledged to curtail the practice with or without Congressional approval. Since then, no companies have announced any of these deals -- known as inversions -- and it’s no coincidence, according to lawyers and investment bankers. The presidential rhetoric has caused several companies exploring inversions to put on the brakes to see what emerges from the political debate, people familiar with the preparations said.

The new caution was seen earlier this month when Walgreen Co. (WAG), the largest U.S. drugstore, passed on the opportunity to move its domicile to low-tax Switzerland when it bought Alliance Boots GmbH. Pfizer Inc., which is on the hunt for inversion targets in Europe after a failed bid for AstraZeneca (AZN) Plc, is also treading carefully as its executives try to get a better handle on the political winds before proceeding, two of the people said, asking not to be identified discussing private information. Photographer: Drew Angerer/Bloomberg Barack Obama, President of the United States.

“Tax-inversion deals is a topic that companies are quite worried about because of the political risk,” said Colin Mayer, a professor of management studies at Said Business School at Oxford. “The issue is now much more politically sensitive, especially after Pfizer (PFE)’s attempt to buy AstraZeneca.”

’Corporate Deserters’

Pfizer, one of the the biggest American drugmakers, in April tried to move its domicile to the U.K. by buying AstraZeneca. It only ended that effort after the London-based company’s board refused to enter talks and the U.K. government opposed it. The dealmaking hasn’t come to a complete halt. Burger King Worldwide Inc. (BKW) is in talks to acquire Tim Hortons Inc. (THI), the companies said today. The combined company would be headquartered in Canada, where Tim Hortons is based and taxes are generally lower than in the U.S.

Between mid-June and late-July, when Obama ramped up his criticism of the deals by calling companies that strike them “corporate deserters,” at least five large American companies announced plans for inversions, including AbbVie Inc. and Medtronic Inc. (MDT) Since the start of 2012, 21 U.S. companies have announced or completed such deals, or almost half the total of 51 such transactions in the last three decades. After Obama called for “economic patriotism” from business leaders in July, Treasury Secretary Jack Lew said the agency was examining options for new rules that wouldn’t require Congressional sign-off.

Future Risks

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