Business
The combined firm IHS Markit will have its HQ in London, with a lower tax rate than what IHS pays now.
Reuters reports:
U.S.-based IHS Inc (IHS.N) agreed to buy Markit Ltd (MRKT.O) to create a $13 billion London-based data and business research provider, in the latest example of a U.S. company moving its domicile overseas where corporate tax rates are lower. The companies said IHS shareholders will own about 57 percent of the combined company following the close of the all-stock deal, which values Markit at about $5.9 billion. Englewood, Colorado-based IHS, whose businesses include Jane's Defence Weekly and technology industry research firm iSuppli, will pay the equivalent of $31.13 per Markit share, a premium of 5.6 percent to Markit's Friday close. Markit's shares were up 10.9 percent at $32.70 at midday. The shares have risen about 23 percent since the company went public in June 2014. IHS's shares, which hit a 3-year low of $92.90 last month, were up 5.6 percent at $116.90. Markit, founded in 2003 by ex-TD Securities credit trader Lance Uggla in a barn north of London, provides pricing and reference data, index and valuation services. IHS Chief Executive Jerre Stead will become chairman and chief executive of the combined company, IHS Markit. Uggla will be president for now and take over the top job after Stead’s retirement on Dec. 31 next year.
USA Today writes:
There's been a lot of criticism of these kinds of deals due to what appears to be companies taking advantage of being able to avoid paying taxes to the U.S. The Obama administration cracked down on inversion deals last year with a new set of rules aimed at making it more difficult for U.S. companies to reincorporate abroad. IHS Markit said it expects an adjusted effective tax rate in the low to mid-20% range, which could actually end up being higher than the effective tax rate the company reported in its latest 10-K filing, of 20.5% for the year ended Nov. 30. IHS shareholders will own about 57% of the company while Markit shareholders own about 43%. The combined company will serve the energy, transportation and financial services sectors, with "significant opportunities to offer a more diverse product set to a broader combined customer base," IHS said in a company statement.
The Wall Street Journal notes:
Still, tax-inversion deals have continued. More recently, the inversion issue has come up in the U.S. presidential election. Last week, presidential candidate Bernie Sanders sent a letter to Treasury Secretary Jack Lew asking him to make it harder for U.S. companies to invert overseas. He specifically called out Pfizer Inc.’s proposed merger with Allergan PLC. Hillary Clinton has also called out companies such as Johnson Controls Inc., a Milwaukee-based auto parts provider that is in the process of merging with Tyco International PLC that will see its legal domicile moved to Ireland, which has a much lower corporate tax rate. One person involved in the deal said IHS and Markit don’t expect the tax aspect of the deal to raise too many eyebrows in Washington. The merger is nearly a 50/50 deal and the U.K. company’s chief executive will ultimately be leading the combined firm, the person said. Those facts suggest the deal is being pursued for strategic reasons and not simply to avoid paying U.S. taxes, the person said.
