By Tiernan Ray, Barron's
June 17, 2014
A couple of folks on the Street today were banging the drum for mergers and acquisitions in semiconductors, arguing that both tax reasons and the search for earnings growth should propel further deals.
FBR & Co.‘s Christopher Rolland today opines that semiconductors are primed for a phenomenon known as “tax inversion” that has already prompted a lot of deal making in the pharmaceuticals industry, in which a U.S. company basically moves almost all its equity to a foreign property in order to shelter overseas cash.
“An inversion occurs when a U.S. corporation reverse merges into foreign acquisition and re-domiciles in a more favorable tax jurisdiction. Besides a favorable ongoing tax rate, the new entity is often able to repatriate its U.S. cash without penalty,” explains Rolland.