WRAPUP 2-New U.S. tax rules chill 'inversion' deal-making; shares dive

Tue Sep 23, 2014 2:21pm EDT
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* U.S. moves against tax-avoidance "inversion" deals

* Burger King-Tim Horton deal to proceed

* Action may deter Pfizer from returning to bid for AstraZeneca (Recasts with Medtronic comments, update stock moves)

By Kevin Drawbaugh and Soyoung Kim

WASHINGTON/NEW YORK, Sept 23 (Reuters) - Tough new U.S. rules on corporate "inversions" on Tuesday sent a chill through the market for the tax-avoidance deals, both pending and potential, with share prices falling sharply in nearly a dozen companies on both sides of the Atlantic.

As investors sold stocks involved in inversions, in which U.S. companies escape high taxes at home by redomiciling abroad, analysts and tax lawyers were surveying the damage to deals currently in the works and the outlook for future transactions.

Despite new rules that will make some inversions costlier and others more difficult to do, Burger King Worldwide Inc said it will proceed with its $11.5 billion deal with Canada's Tim Hortons Inc, stressing that the transaction was not about tax benefits.

In announcing their intention to proceed, the two companies said in a statement: "This deal has always been driven by long-term growth and not by tax benefits."

The U.S. Treasury Department unveiled harsher-than-expected changes late on Monday to the existing rule book for inversions, which have surged this year and caused concern in Washington about the threat posed to the U.S. corporate income tax base.   Continued...