US $53.7 billion swallowing shire Aberdeen touches the nerve of US tax reverse transaction

Source: e-medicine Facebook on July 18, 2014, with the recommendation of the board of directors, shire shareholders finally agreed to accept the M & a invitation of Albright, and became the largest tax reverse transaction in the history of the United States with a high price of 53.7 billion US dollars However, the move also makes American politics nervous: if we don't take action again, something will happen After June 20, the first offer of US $46.5 billion and the second increase of US $51.5 billion, shar shareholders converted their final equity into 24.44 pounds (US $41.2) cash per shar share and 0.8960 additional shares issued by Aberdeen The two sides plan to set up a new company in Jersey, the registered place of shire, with its headquarters in Chicago, and to sell its shares on NASDAQ More importantly, the joint venture's tax location will be transferred from the United States to the United Kingdom, "although both the United States and the United Kingdom are important markets," according to the company's announcement According to Reuters, the actual tax rate for new companies in 2016 will be about 13%, far lower than the US tax rate of 35% for local companies and the UK tax rate of about 20% for local companies If we simplify Albertville and shire as domestic enterprises in the United States and the United Kingdom, and the tax has not been reduced, the amount of tax avoidance this time is equivalent to half of the annual income of Sumeria At the same time, new Aberdeen will have free cash flow around the world Such tax avoidance naturally aroused controversy in American politics U.S Treasury Secretary Jacob Lew this week called on Congress to take steps to stop businesses moving tax locations overseas, calling for "economic patriotism." Remember when Pfizer bought AstraZeneca? This gentleman is also a flag, but the decision of the United States is not the finance minister has the final say The general situation is to be voted by two parties The Obama administration and some Democratic Party members actively support legislation to restrict such transactions, which also makes the AI who need to buy the shire be ranked the target But free-market Republicans are less likely to agree with Democrats, although the first Republican senator, Orrin Hatch, has emerged to support short-term measures to prevent reverse trading In the face of the debate between the two parties, Richard Gonzalez, chairman of Alberto, did not want to pay any attention to the anxiety of the U.S government: "if the current tax inversion dispute can promote the United States to change its tax policy, this is the more appropriate thing." Gonzalez also complained about the government's harsh tax collection plan for the profits of U.S companies' overseas subsidiaries: in theory, if overseas profits are remitted back to China, they need to be taxed at a tax rate of 35%; but as long as these profits are kept overseas, the United States will not receive a cent of the tax, "compared with our overseas competitors, we are at a disadvantage." According to the data, in 2010, American enterprises left more than $1.5 trillion in profits overseas In response, Goldman Sachs believes that after the mid-term presidential election, in view of the current blowout of this new tax inversion, the U.S government may reform the corporate tax law to curb this tax inversion transaction (the figure below shows the relationship between the occurrence of tax reverse transactions and the introduction of anti tax reverse transactions laws in the United States.) Will Aberdeen be lucky to close the deal in the fourth quarter of 2014 as planned? In any case, the next company to try to reverse tax by M & a must not be so easy.