The Rising Influence of Rising Affluence

[DewDiligence]

Why the XOM-XTO Deal Was All-Stock (addendum)

[I reposted the following from the ‘Big Dog's Boom Boom Room’ board on SI ( http://siliconinvestor.advfn.com/readmsg.aspx?msgid=26180785 ) in reply to a poster named ‘jrhana’. Feedback welcome!]

>One more reason for all-stock deal would be tax implications for XTO shareholders<

Understood; however, I do not buy the notion that the above was the main impetus for the XOM-XTO deal to be for stock rather than cash.

Imagine the PR hit XOM would take in Congress and in the lay press if they publicly disclosed that they wanted the XTO deal to be all-stock in order to avert having to pay US income taxes on the accumulated profits of XOM’s foreign subsidiaries!

Even worse would be the that such a disclosure might have on the desire of Obama and many Democrats in Congress to eliminate this tax “loophole”* and make US-based companies pay US income tax on their worldwide profits regardless of the country of origin. XOM is sufficiently prominent and sufficiently hated by liberals in Congress that such a disclosure could well precipitate the passage of a business-unfriendly tax bill in 2010 or 2011.

In summary, I’ve seen the “official” rationale for the XOM-XTO deal being all-stock and I don’t believe it; instead, I stand by the post in #msg-44517114.

*Never mind that the US is the only major country in the world to tax a company’s foreign profits!