DEALTALK-Amid tax inversion craze, some U.S. companies get cold feet

Mon Aug 25, 2014 6:19pm EDT
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By Soyoung Kim

NEW YORK Aug 25 (Reuters) - The headline noise may suggest otherwise but U.S. companies' interest in tax-driven deal-making may be starting to cool down.

Bankers and lawyers providing takeover advice said on Monday that Burger King Worldwide Inc's intention to move its tax domicile overseas through a so-called inversion deal - in this case the purchase of Canada's Tim Hortons - shouldn't be seen as a sign of a lot more deals to come.

They say that U.S. companies looking to buy overseas rivals primarily for tax benefits are increasingly dismayed by rising prices, administrative hassles and fears of a U.S. government crackdown.

Inversion deals allow U.S. companies to move their domicile abroad to countries such as Ireland, Britain, the Netherlands, and in Burger King's case Canada, where corporate taxation laws are more favorable than at home. In particular, some multinational companies are reluctant to stay in the U.S. because profits earned overseas are taxed here. In some of the jurisdictions, companies pay no tax on these profits.

So far in 2014, nine corporate inversion transactions have been struck, the most in any given year. On Sunday, Burger King became the latest company seeking to move its domicile abroad through its proposed deal for Canadian coffee and doughnut chain Tim Hortons Inc. Canada's overall corporate taxes are lower than those in the United States.

Dealmakers now say the market for inversions is slowing down. For every tax inversion deal that gets announced, they said, there are many more that don't get done.

Political scrutiny on inversions is increasing in the run-up to the November Congressional election, with the Obama administration saying in recent weeks that it is looking for ways to make it harder and less rewarding for companies to do inversions.   Continued...