Inversion deals were once a little-known exercise in financial engineering to reduce U.S. companies’ taxes. Now, they’ve become an issue potent enough to threaten a Treasury nomination, prompt a broad review of U.S. tax rules, and divide Democrats.
While inversions — in which a U.S. firm moves its legal domicile to a lower-tax country, often by buying a rival — have been around since the 1980s, they entered the public’s consciousness this year as well-known companies including Pfizer Inc. and Burger King Worldwide Inc. (BKW) attempted the strategy. Coming amid a debate over income inequality and the economy’s slow recovery, the maneuvers to cut corporate taxes have aroused public ire.
Stryker Corp. (SYK) may become the latest company to attempt an inversion, with the Michigan-based manufacturer of surgical equipment weighing a bid for $16 billion U.K. rivalSmith & Nephew Plc (SN/), according to people familiar with the matter. At the same time, President Barack Obama’s choice of Lazard Ltd. banker Antonio Weiss for Treasury undersecretary has been criticized by prominent Democratic lawmakers over his firm’s involvement in similar deals.