Reuters - Video

Edition: US | UK | IN | CN | JP

Video

Breakingviews: Inversion subversion

Wednesday, September 24, 2014 - 03:19

Rob Cyran and Jeffrey Goldfarb discuss the deals that are likely to be affected by the U.S. Treasury's clampdown on tax-driven M&A.

▲ Hide Transcript

View Transcript

President Obama has come out what his plan to stop order trends slowed down. What he calls unpatriotic conversions companies moving overseas by way -- and today. And to cut their tax bills here in the United States. Rob you've taken a look at them all the situations that are kind of affected by this. Ultimately though it may stop some of the. Stupid yeah let it does is companies by the -- -- lots of reasons are good reasons like minister -- if you if you if you shoe companies and you'll be stronger together makes sense to merge. You -- the company just as you -- cut your tax bill probably not a good idea I would say just a revote since we've seen DEA and that the deal was go all the way from just. Just only being for attacks to only -- and -- reason halting in between. And there a couple of different reforms he announced first off he's gonna make it so it's basically harder to transfer money that's trapped overseas because if you bring it back now. You'd pay a tax penalty. Until a lot of companies such -- attack and and our companies just leave their cash overseas to 01 of the more over one's sort of a hidden ways that people are doing in the terms of you can repatriate the tax ain't -- no longer in US based company so you don't have to pay -- -- -- and and and when it deals for instance was. Medtronic and Canadian two parts makers basically for a medical parts -- and what did is they combined and they were gonna cut the tax rate they said there weren't that much wind synergies that may attract -- huge premium. And the reason they were doing it seems as good as Medtronic have a lot of cash or proceed in this saliva indeed that the new rules don't allow that's the question is will this merger. Go ahead it's it's part of his -- well hit basically anything. They hadn't closed. As a gesture exactly where because of their bunch of deals they're sort of Islam is still open yet this and this front still opens it may not actually close their other deals which could cause who may not close for. Because of other clamp -- When the other -- is something called spin version that's -- company spins off one of its divisions. That a company buys it and then in efforts to different actors fiction so -- example one of those violent for instance is buying a bunch of drugs which for a fading -- kind of dying drugs from Abbott. I'm and that point was that mileage my mylan -- generic company is going to -- overseas. The new rules say it's much harder to do it's been versions of that deal -- so ultimately go. This we don't think there's a sort of a stop living in her record -- the end of -- isn't that what they're still big tax benefit to doing them because if you if you do invert. You don't. You can you can cut. What are the ways to cut taxes you do inter company loan. It's -- the -- came out robot from Obama to do not believe they don't they don't affect that's called -- it's outstripping -- starving but. The treasury and made it clear that they're going to tackle this at a future date so one of the main reasons why companies convert to basically cut their tax rate and -- that paying 30% paying. 9% ten -- 12%. That could disappear in the futures that makes further. Makes more deals -- -- in the future harder to do -- we will leave it there and bell will be back with more breaking -- tomorrow.

Press CTRL+C (Windows), CMD+C (Mac), or long-press the URL below on your mobile device to copy the code

Breakingviews: Inversion subversion

Wednesday, September 24, 2014 - 03:19