U.S. issues new inversion rules to crack down on tax avoidance
LONDON—A handful of companies that investors once viewed as ripe for takeover by U.S. rivals isn’t looking so attractive early Tuesday, after the White House unveiled a sweeping effort at cracking down on the tax benefits of cross-Atlantic mergers.
The Obama administration moved Monday to rein in so-called inversions, a structure in which American companies have been buying mostly European rivals, but moving their headquarters overseas to benefit from lower taxes. U.K. and Irish companies have been particularly attractive targets because of their generally lower corporate tax regimes.
In recent months, several European drug makers have been approached—like AstraZeneca PLC—or have agreed to deals—for instance, Shire PLC. Other European-based companies have been the subject of takeover speculation, such as medical technology business Smith & Nephew PLC and Actelion Pharmaceuticals Ltd. Shares of Ireland-based Shire, which agreed to a $54 billion takeover from American rival AbbVie Inc., were down 6% at midday in London trading on Tuesday.
U.K.-based AstraZeneca, the target of a failed bid from Pfizer Inc., dropped 5%. Pfizer hasn’t ruled out another bid for the company after AstraZeneca this year turned its earlier approaches down.
