US medical technology giant Steris yesterday announced it had bought British health services provider Synergy Health in a $1.9bn (£1.2bn) deal that re-opened the US tax inversion debate.
Steris said it would buy Synergy, whose shares rocketed by more than 30 per cent yesterday, in a cash-plus-shares deal that would shift its domicile to the UK. This would cut its tax rate from 31.3 per cent this year to 25 per cent from next April.
New Steris is expected to have revenue of about $2.6bn and 14,000 employees in 60 countries. Steris chief executive Walt Rosebrough will lead the new company, while Dr Richard Steeves, Synergy’s boss, and two other directors of the Swindon-based firm’s will join the board.
The draw of much smaller tax bills in Ireland and Britain has prompted US firms to attempt so-called “tax inversions”. At 40 per cent, the US has the world’s highest corporate tax rate.
In September, the Obama administration said that companies would no longer escape tax on US earnings by restructuring under foreign ownership.
Panmure Gordon analyst Savvas Neophytou told City A.M. that the deal was “quite a significant moment. It must also be viewed in the context of Pfizer coming back with a new bid for Astrazeneca”.
Pfizer has to wait until after 25 November under UK takeover rules to make another bid after having its £69.6bn offer for the UK pharma giant rebuffed five months ago.
Synergy shares were up 31.43 per cent at 1,840p.
TAX INVERSION DEALS ANGER US AND UK
In January, The US viagra-maker bids £58.8bn to buy British rival Astrazeneca, and create a UK tax domicile. Pfizer is rebuffed even when it ups its offer to £63bn.
US SENATORS IN TAX DEAL CRITICISM
On 13 May, six US Senators criticised Pfizer for seeking a tax inversion.
CHUKA UMUNNA IN BLOCKING THREAT
Two days later, shadow business secretary, Chuka Umunna, has threatened to block the £63bn takeover if Labour came to power in May 2015, saying he would subject a deal to a public interest test.
After five attempts, in May UK drug maker Shire accepted US rival AbbVie’s sweetened £31.4bn takeover. The company will be tax domiciled in Jersey.
DEAL WOULD SLASH ABBVIE’S TAX BILL
The move that would cut AbbVie’s effective corporation tax rate from 22 per cent to 13 per cent by 2016
SHARES FALL ON MOVES TO CURB DEALS
Shares in Shire – and other UK pharma firms – fell sharply on 22 September after the US announced plans to curb inversion deals that allow US companies to cut their tax bills.
BURGER KING-TIM HORTONS
In late August, Burger King Worldwide announced a deal to acquire the Canadian coffee-and-doughnut chain Tim Hortons in a cash and stock deal worth $11.5bn (£7.1bn).
WHOPPER OF A TAX ROW
The deal, which would see the merged company tax domiciled in Canada, was the straw that broke the camel’s back, with treasury secretary Jacob Lew announcing rules to curb tax inversion deals.
CANADA DEFENDS DEAL
Finance minister Joe Oliver denies it is a “tax dodge” because the firm will pay Canadian taxes.
BEHIND THE DEAL
INVESTEC| PATRICK ROBB
1 Patrick is a director in Investec’s Corporate Broking team, based in London.
2 He has recently worked on the Gamma Telecom IPO, a small fundraising for Zotefoams, a funding round for global wireless chip company Nujıra and the Servelec IPO at the end of 2013.
3 Patrick has been at Investec since 2001 and before that he was 15 years in corporate broking at Smıth New Court/Merrıll Lynch
Lazard was financial adviser to Steris, while Wachtell, Lipton, Rose & Katz and Jones Day were its legal adviser. Investec Bank was the financial adviser to Synergy, while DLA Piper acted as legal counsel.