Skip to content
Matt Levine

Inversions, Short-Termism and Congress

Also Panama, Argentina, Valeant and corporate directors.


The consensus seems to be that the anti-inversion rules that Treasury released late Monday were aimed directly at one deal: the Allergan/Pfizer merger. In particular, the inversion rules have for a long time prevented transactions in which a small foreign company acquires a big U.S. company and takes the foreign tax address, but have allowed transactions in which a big foreign company acquires a similarly-sized U.S. company and keeps its foreign address. That's not an inversion, that's just a merger. (Though everyone calls it an inversion anyway.) But the new rules "will prevent a foreign company (including a recent inverter) that acquires multiple American companies in stock-based transactions from using the resulting increase in size to avoid the current inversion thresholds for a subsequent U.S. acquisition." That's Allergan, which inverted last year as part of a deal with Actavis, itself the product of inversions. If you strip out all of the U.S. assets acquired in the previous inversions, you get a small foreign company acquiring a big U.S. one, and under the new rules the combined company must remain a U.S. taxpayer.