Breakingviews

Chiquita inversion slips on cash appeal

October 27, 2014

The banana company’s shareholders voted down a stock deal to acquire Irish produce distributor Fyffes, a decision that now points to a sale to Brazilian buyers. Ailing arbs, a crackdown on tax-driven M&A and economic ructions didn’t help. The path of least uncertainty wins again.

Tax clampdown could deter half-baked pharma M&A

September 23, 2014

The U.S. attack on companies relocating to avoid taxes will calm pharma’s M&A binge. Deals like AbbVie’s purchase of Shire may survive on strategic logic. Pure tax-driven combinations, like Mylan/Abbott, look tricky. That lessens AstraZeneca’s vulnerability to a bid from Pfizer.

Buffett and tax outrage both diversions in BK deal

August 26, 2014

The Sage of Omaha is lending Burger King money, at a lucrative 9 percent, but his imprint tells stock investors nothing. And contrary to social media hysteria, a new parent company in Canada isn’t going to fleece the U.S. taxman. The $11 bln purchase of Tim Hortons is just an LBO.

Burger King tax flip merger logic doesn’t stack up

August 26, 2014

The $9.6 bln burger chain’s investors cheered its talks to buy Canadian doughnut shop Tim Hortons and move its headquarters across the border. There’s little obvious tax arbitrage, and Burger King isn’t larded with foreign cash. Inversion alone can’t justify the market’s appetite.

Why can Burger King, but not Wendy’s, own Hortons?

August 26, 2014

In 2005, Bill Ackman, now BK’s No. 2 shareholder, pressured rival Wendy’s to spin off the Canadian doughnut chain - arguing it was undervalued, the synergies “minimal” and management insufficiently incentivized. Funny how a robust dose of financial engineering changes minds.

REITs and MLPs make tax inversions a diversion

July 31, 2014

U.S. authorities are letting Windstream call its telecom cables real estate, qualifying them for tax breaks. And a partnership will shield Hess assets from the IRS. Politicians, though, are indignant over firms that move overseas – even when home-grown tax loopholes are costlier.

Inversions start to spin out of control

July 30, 2014

A quest for tax savings has made digestible overseas targets attractive to U.S. buyers. Hospira’s potential $5 bln deal for a Danone unit highlights a fresh supply, for so-called “spinversions.” The odd combination also reflects the perverse incentives distorting corporate decisions.

Supercharged IPO tax spoils need splitting

July 8, 2014

KKR and Silver Lake are listing web hosting outfit GoDaddy. The use of what’s called an “Up-C” structure means the company will float with big tax deductions. IPO investors and existing owners will both benefit, but other IPOs with Up-Cs have seen more dubious arrangements.

Tax-arbitrage M&A requires a deep discount

July 2, 2014

U.S. companies seeking to relocate by mergers were a big part of the $1.8 trln first-half deal boom. The benefits of such ill-conceived combinations will be fleeting. Tax reform is already being discussed. And the more inversions there are, the more likely the law is to change.

Obama’s corporate tax plan is a good start

February 23, 2012

The president’s proposal to reduce the rate paid by companies to 28 pct and eliminate many loopholes gets the debate moving in the right direction. But there’s plenty of room to improve the plan, too. For one thing, it would make global competition tougher for domestic firms.