Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Speculating in Takeover Targets -- Ignore unavailable to you. Want to Upgrade?

To: richardred who wrote (3731)	8/8/2014 1:10:44 PM
From: Glenn Petersen	Read Replies (1) \| Respond to of 7242

Tax breaks do play a role in corporate planning at the local level also. I think some of the high local tax states like NY are finding this out. Absolutely. Illinois has also lost a large number of companies because of its high corporate and individual tax rates. Both Wisconsin and Texas have actually run ad campaigns in the state. Local municipalities try to offset the damage by offering various incentives, including relief on real estate taxes.

To: richardred who wrote (3731)	8/8/2014 3:04:47 PM
From: Glenn Petersen	1 Recommendation Recommended By richardred Read Replies (1) \| Respond to of 7242

I guess this still leaves the door open for foreign companies to buy US companies and bring surplus currency back to their home country at their lower tax rate. An Inversion in All but Name By JEFFREY GOLDFARB DealBook New York Times August 8, 2014 2:08 pm Behold the unversion. United States-based data protection firm SafeNet may very well be able to slash its tax rate as part of a cross-border deal. Instead of doing so by acquiring an overseas company – a move known as an inversion – it is selling itself for $890 million to Dutch digital security outfit Gemalto. The deal shows the limitations of a possible Washington ban on inversions. Corporations have been trying to leave the shores of the United States apace. Exploiting a portal in the tax code, they are buying smaller rivals in other countries as a way to change domicile and in some cases sharply reduce what they owe to Uncle Sam. The backlash, now joined by President Obama, has become strident. The decision by drugstore chain Walgreen to opt out of a potential inversion this week could be one notable consequence. Sales of American companies to overseas buyers, though, are not in the cross-hairs. Yet SafeNet’s deal could have a similar effect to an inversion. Presumably its tax home can shift from Baltimore to Amsterdam, where its new $8 billion parent company is located. Over half SafeNet’s sales last year were generated outside the United States, Gemalto said on Friday, and would therefore be eligible for a reduced tax rate under a new domicile. SafeNet was taken private in 2007 by buyout firm Vector Capital so recent financial information is not public. According to a prospectus filed as part of a plan to float again a few years ago, SafeNet indicated it may have some buffers to curb its tax bill temporarily. In its last annual report as a public company, however, the company reported an effective income tax rate of 36 percent in 2003, 42 percent in 2004 and 50 percent in 2005. Last year, Gemalto’s tax rate was 12 percent. As mergers go, the SafeNet deal is relatively plain vanilla. The buyer’s shares even went up on the news, as often happens these days. For the anti-inversion crowd, though, it may signify something more important. A Washington crackdown won’t necessarily stop United States companies from emigrating. In lieu of seeking a target with a cheaper tax domicile, they may just hang out for-sale signs to attract foreign suitors. Jeffrey Goldfarb is U.S. editor at at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com. dealbook.nytimes.com

To: richardred who wrote (3731)	9/28/2014 11:15:28 AM
From: richardred	Respond to of 7242

Your Inversion Is Germany's Takeover 3 Sept 23, 2014 10:53 AM EDT By Leonid Bershidsky The U.S. Treasury Department's action against tax inversions won't keep all U.S. companies from lowering their tax bills through foreign mergers. Many companies that have been looking for ways to reincorporate abroad will instead become more amenable to takeovers by foreign corporations, whose appetite for U.S. business is growing. German companies especially have been on a buying spree in the U.S. Billion-dollar deals involving a German acquirer and a U.S. target announced so far this year include: Merck KGaA's planned takeover of life-science equipment maker Sigma-Aldrich Corp. for $16.4 billion in cash Bayer AG's offer of $14.2 billion for Merck & Co. Inc.'s consumer care business ZF Friedrichshafen AG's purchase of car part maker TRW Automotive Holdings Corp. for $12.8 billion Siemens AG's acquisition of oilfield equipment maker Dresser-Rand Group Inc. for $7.5 billion SAP AG's purchase of expenses software developer Concur Technologies Inc. for $7.2 billion; Infineon Technologies AG's takeover of power circuitry maker International Rectifier Corp. for $2.3 billion Continental AG's acquisition of Veyance Technologies Inc., which makes auto components, for $1.9 billion German companies have already spent more in the U.S. in 2014 than in any full year in the past two decades. Add other Europeans -- Sweden's Electrolux, which is picking up GE's appliances business; Switzerland's Roche, investing in lung medicine start-up InterMune; U.K. tobacco companies poaching U.S. cigarette brands -- and you have a major boom in European acquisitions. So far this year, according to data compiled by Bloomberg, 709 such deals worth a total of $140 billion have been proposed, compared with 835 deals for $183 billion in which U.S. companies are the buyers of European businesses. Who says Europe's economy is feeble compared to the U.S.? The Europeans have their reasons to be interested in U.S. companies. As their home markets stagnate, they have to rely on exports and internationalization in order to grow. The euro has been strong recently, making U.S. acquisitions more attractive, but the European Central Bank's policies are driving the currency down, and companies want to move while the prices are relatively low. German exporters have the cash on hand and the available credit to buy coveted technologies. There are two sides to every deal, of course, and U.S. company shareholders have their reasons for selling. One of them -- though perhaps not the biggest -- is the U.S. tax system. At least one of the companies recently acquired by Germans, Sigma-Aldrich, was recently mentioned as an inversion candidate. Now, its tax optimization will be Merck's headache. Germany has a high effective corporate tax rate -- just under 30 percent -- but the EU, borderless for business purposes, has plenty of friendlier jurisdictions. The Treasury Department's fact sheet on its new inversion rules says the U.S. government has nothing against "genuine cross-border mergers": they "make the U.S. economy stronger by enabling U.S. companies to invest overseas and encouraging foreign investment to flow into the United States." Indeed, the European cash goes to the acquired companies' U.S. shareholders, who pay tax on the transaction. The end result of "genuine" deals, however, is the same for purely tax-motivated ones: Companies pay U.S. taxes only on their American business. The U.S. government cannot get its hands on their overseas cash. The Treasury has closed some inversion-related loopholes. It will now be more difficult for U.S. companies to lend overseas cash to new overseas parents or to sell them their cash-accumulating subsidiaries. It will also be hard to make foreign companies look bigger and U.S. ones smaller to pass off an inversion deal as a genuine foreign takeover. None of the new strictures, however, will apply to the European purchases. U.S. policy makers need to be consistent. If their goal is for U.S. companies to stay in American hands so they can be taxed on their foreign as well as U.S. operations, they need to make all cross-border acquisitions difficult -- an ugly measure that would destroy the U.S.'s reputation as an open economy. If, however, their goal is to keep U.S. firms nimble, competitive and acquisitive, they should relax tax rules and perhaps even let firms pay taxes only to the countries where their business is conducted. To contact the writer of this article: Leonid Bershidsky at lbershidsky@bloomberg.net. To contact the editor responsible for this article: Mary Duenwald at mduenwald@bloomberg.net. bloombergview.com