The Rising Influence of Rising Affluence

[DewDiligence]

(MYL/ABT)—US Treasury’s new rules would appear to prohibit the “spinversion” deal between these companies in which MYL was to acquire ABT’s (negative-growth) branded-generics business in Europe, Japan, Canada, Australia, and New Zealand (#msg-104264092):

http://www.treasury.gov/press-center/press-releases/Pages/jl2645.aspx

Prevent a U.S. entity from inverting a portion of its operations by transferring assets to a newly formed foreign corporation that it spins off to its shareholders, thereby avoiding the associated U.S. tax liabilities, a practice known as “spinversion.” (Action under section 7874 of the code) In some cases a U.S. entity may invert a portion of its operations by transferring a portion of its assets to a newly formed foreign corporation and then spinning-off that corporation to its public shareholders. This transaction takes advantage of a rule that was intended to permit purely internal restructurings by multinationals. Under today’s action, the spun-off foreign corporation would not benefit from these internal restructuring rules with the result that the spun off company would be treated as a domestic corporation, eliminating the use of this technique for these transactions.

No comment yet from MYL or ABT.