Shares of U.S. companies that have bid for foreign companies
through so-called inversions came under pressure on Tuesday, after
the Obama administration updated rules that sapped some of the tax
benefits from these moves.
Medtronic Inc. fell 2.7%, among the top decliners on the S&P
500. The company has agreed to acquire Ireland-based Covidien PLC
for $42.9 billion and said it would move its headquarters to
Ireland as part of the deal. U.S.-listed shares of Covidien fell
2.4%
Inversions involve a U.S. company buying a foreign rival and
relocating the combined headquarters to the lower-tax country.
Deals have been concentrated in the pharmaceutical sector, often
with a U.S. company acquiring a European one.
The rules don't apply to transactions that have already closed,
but they are prompting investors to question whether some deals
will have to be renegotiated--or even scuttled.
The Treasury Department is "trying to make inversions a lot more
difficult to complete," said Tao Levy, managing director at Wedbush
Securities. Mr. Levy covers medical-device companies, including
Medtronic.
"Even if it makes a lot of strategic sense .. it might be
financially difficult for [the companies] to complete it," said Mr.
Levy, referring to the inversion deals.
Shares of Mylan Inc. declined 1.6%. Mylan in July agreed to
acquire Abbott Laboratories' overseas generic pharmaceuticals
business in an all-stock transaction worth about $5.3 billion. The
new company is to be based in the Netherlands. Abbott shares fell
1.1%.
Also coming under pressure were AbbVie Inc. shares, which fell
2.3%. The company agreed to acquire Shire PLC for $54 billion and
said it would move its tax headquarters to the U.K.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires