Cantillon: Inverison clampdown leaves Tyco and Johnson unscathed

Pfizer and Allergan are not the only companies juggling with the fallout from the US Treasury's new rules on corporate inversions. They're not even the only ones with an Irish interest.

Cork-based Tyco is in negotiations with Johnson Controls over an inversion that will see the US group assume Irish domicile. While Allergan's rapid expansion by acquisition paid for with stock left it vulnerable to the new clampdown, Tyco is not exposed to the same degree.

The respective likely shareholdings in the new group – roughly 56/44 per cent in favour of Johnson shareholders – also leaves it well within the 60 per cent threshold that allows a merged group access about $8 billion in unrepatriated Johnson profits.

That leaves only the new clampdown on earnings stripping – where a foreign owner lends money to its US subsidiary and then deducts interest from pre-tax profit, reducing the subsidiary’s exposure to tax. The likelihood is that the Tyco/Johnson deal will survive this threat.

All of which reinforces the view that the Treasury was only concerned with killing the Pfizer deal.