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investors often don't reap big returns
taxes is a hot strategy in corporate America, but many companies that have done such "inversion" deals have failed to produce above average returns for investors, a Reuters analysis has found.
Looking back three decades at 52 completed transactions, the review showed 19 of the companies have subsequently outperformed the Standard Poor's 500 index, while 19 have underperformed. Another 10 have been bought by rivals, three have gone out of business and one has reincorporated back in the United States.
Among the poorest performers in the review were oilfield services and engineering firms, all from Texas. Among them was the first of these companies to invert, McDermott International Inc , which moved its tax home base to Panama in 1983.
Drugmakers are dominating the latest wave of inversions and most of them have outperformed the benchmark index. pharmaceutical firms have agreed to redomicile to Ireland, Canada or the Netherlands. Deals that have not been completed were excluded from the review.
It is impossible to know how the companies might have fared in the market had they not inverted. Innumerable factors other than taxes influence a stock's performance, and no two of these deals are identical, complicating simple comparisons.
But the analysis nike air max 2015 black and purple makes one thing clear: inversions, on their own, despite largely providing the tax savings that companies seek, are no guarantee of superior returns for investors. company initially forming or buying a foreign company. and into the foreign company's home country. business the body.
Companies that do these deals typically promise shareholders will benefit. But aside from stock price underperformance by many, inversions can also impose substantial up front tax costs. When a deal occurs, investors must recognize any taxable capital gains on their stockholdings. These costs are not taken into account in the study as they differ for each shareholder and don't apply in some cases.
"For some companies, these inversions are really smart business moves. For others, they're less smart . You don't always know if it's going to work," said James nike free run men shoes Hines, professor of law and economics at the University of Michigan and one of a handful of academics who have closely studied these deals.
TAXES AND TEXAS
Corporations that invert say they are only seeking to pay the lowest tax rate they can get, noting this is what shareholders would expect them to do.
Inversion was pioneered as a strategy by oilfield companies that reincorporated chiefly in the Cayman Islands, Bermuda and Britain. Most have lagged the S since their inversions were completed: McDermott by 85 percent; Rowan Cos Plc by 35 percent; Transocean Ltd by 18 percent; among others.
These oilfield stocks also largely underperformed narrower Thomson Reuters and Dow Jones oil and gas equipment and services sector indexes, looking as far back as index data allows.
McDermott did not reply to questions sent to the company. Transocean did not respond to requests for comment.
A Rowan spokeswoman referred questions to the company web site. insurance firms, with half of them outperforming and the rest either acquired or out of business.
White Mountains Insurance Group Ltd , managed from Hanover, New Hampshire, has outpaced the S by 248 percent since reorganizing in 1999 as a Bermuda corporation, for example.
With only four exceptions, the inverted companies that were still in business since doing their deals either uniformly underperformed or outperformed on both benchmarks. engineering and construction group Foster Wheeler AG announced in November 2000 when its stock was worth about $45 per share that it was inverting to Bermuda. The deal, a statement said, was "expected to benefit Foster Wheeler and its stockholders for several reasons."
Since the announcement, the company's stock has lagged the S 500 by 50 percent; since the deal was concluded in May 2001, it has trailed the index by 83 percent. Foster Wheeler agreed in January 2014 to be acquired by UK rival Amec Plc for about $32.69 per share in Amec stock and cash nike air jordan retro at the time. The deal is expected to close in the fourth quarter.
Foster Wheeler spokesman Scott Lamb said the Nike Air Max Mens company dealt with weak markets, several problematic projects and a major debt restructuring after it inverted to Bermuda.
Following recent deals by major companies such as Medtronic Inc , bankers and analysts have said that another burst of deals is waiting to be unveiled in September.
Congressional action this year is unlikely with Republicans so far opposing Democrats' proposals, analysts said, though the Obama administration has been weighing executive actions.
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