Cyberonics Merges With Sorin, Domiciles In UK
Two medical device companies, Cyberonics Inc from the United States and Italy’s Sorin SpA, have agreed to form a joint medical devices company with a combined equity value of USD2.7bn and will take advantage of the lower tax rate in the United Kingdom.
Under the terms of the proposed transaction, which is expected to be completed towards the end of this year, Houston-based Cyberonics and Milan-based Sorin will combine under NewCo, which will apply for dual-listing on NASDAQ and the London Stock Exchange.
The all-stock transaction will be implemented through two mergers, after which Cyberonics shareholders will own about 54 percent of NewCo and Sorin shareholders will own about 46 percent.
It has been stressed that the merger is being driven by strategic and industrial factors, rather than by its tax advantages. However, it will also be seen as evidence that US multinationals still have an appetite for using tax inversions to move their tax residences abroad – in this case, away from the 35 percent US corporate tax rate, to instead take advantage of the 21 percent headline UK rate and also its patent box regime.
Under current law, despite the US Treasury Department’s anti-inversion measures announced in September last year, a company that merges with an offshore counterpart can move its headquarters and tax residence abroad (even though management and operations remain in the US), and take advantage of lower taxes, as long as at least 20 percent of its shares are held by the foreign company’s shareholders after the merger.
