Horizon Pharma Moves To Ireland Even As US Lawmakers Threat Looms

(RTTNews) - Specialty drugmaker Horizon Pharma plc (HZNP) on Friday managed to redomicile itself as an entity incorporated in Ireland following the completion of its $660 million acquisition of Vidara Therapeutics International plc. The deal will help it avoid paying the high rate of U.S. corporate taxes.

The move comes even as lawmakers threaten such companies of reversing the so called tax inversion deals with retrospective effect from May 8, 2014.

Congressional Democrats have already submitted legislation aimed at curbing U.S. companies from doing inversions. Under the proposal, companies that carry out certain types of inversions after May 8, 2014 would remain U.S. corporations for tax purposes. This is aimed at halting the wave of such deals in recent times.

Apart from the legislative proposals, US Treasury Secretary Jack Lew said recently that he is working on regulations to limit the tax advantages of inversion deals.

Companies like drug maker Valeant Pharmaceuticals International, Inc. (VRX, VRX.TO), Actavis plc (ACT), and Endo International plc (ENL.TO) have already closed such deals since 2010.

Horizion is reportedly the first among over a dozen companies that has successfully closed such deals in recent times. Others are still awaiting closure of the deals.

In order to execute tax inversion deals, the shareholders of the acquired company must receive stock amounting to at least 20 percent of the combined entity.

Several U.S. healthcare companies are increasingly looking at inversions as an option to escape the high rate of corporate taxes in the U.S., which is among the highest in the developed world, as the U.S. overhauls its healthcare system under the Affordable Care Act.

Some of these companies are sitting on huge cash hoards in their overseas subsidiaries and would be heavily taxed if they repatriated these funds to the U.S. The statutory tax rate in the U.S. is currently 35 percent, while it is 12.5 percent in Ireland and even lower in some other countries.

Medical device maker Medtronic, Inc. (MDT) agreed in mid-June to acquire Dublin, Ireland-based smaller rival Covidien plc (COV) in a cash and stock deal valued at about $42.9 billion.

Another U.S. drug maker AbbVie, Inc. (ABBV) has also agreed to a $53 billion deal to acquire Irish drug company Shire Plc. (SHP.L, SHPG) in mid-July.

U.S. drugmaker Pfizer Inc. (PFE) recently made an abortive $116.6 billion takeover bid for British drug maker AstraZeneca plc (AZN, AZN.L) through an inversion. Parsippany, New Jersey-based Actavis relocated to Ireland through an inversion.

In the most recent tax inversion deal, Burger King Worldwide, Inc. (BKW) in late August agreed to acquire Canadian quick-service restaurant chain Tim Hortons, Inc. (THI, THI.TO) in a deal reportedly valued at about $11.4 billion to create a combined entity that will be publicly-listed and headquartered in Canada.

Concerned about the urgency shown by U.S. lawmakers to close the inversion loophole also deterred U.S. agricultural products giant Monsanto Co. (MON) to put talks on a hold related to a near $40 billion acquisition of Swiss crop chemicals company Syngenta AG (SYT) in late May.