Would The Johnson/Tyco Deal Have Happened Under A President Trump?

Johnson Controls Inc JCI and Tyco International PLC have announced a mega merger this week that, upon completion, would save the combined company at least $150 million per year on taxes and at least $500 million per year in costs over the first three years.

Inversion fever
The structure of the so-called inversion deal will allow Johnson Controls to avoid U.S. taxes by adopting Tyco’s Ireland domicile. The merger is just the latest in a growing number of inversion mergers, including Pfizer Inc. PFE’s 2015 buyout of Allergan plc Ordinary Shares AGN last year.

Could Trump strike back?
Republican presidential frontrunner Donald Trump has been extremely vocal in opposition to U.S. companies outsourcing jobs. However, Kellner Capital’s Chris Pultz told Benzinga that Trump would likely not attempt to change the guidelines for inversion deals like these, and would instead focus on changing the laws that motivate the deals in the first place.
 

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“He believes companies shouldn’t be punished for doing inversions, just that the corporate tax structure should be changed. If the corporate tax structure is changed where the United States becomes a beneficial place to do business because of its taxes, then we wouldn’t have to worry about these kinds of inversion deals,” Pultz told Benzinga.

Restrictive guidelines on the way?
For now, Kellner is waiting on any word of another round of prohibitive inversion guidelines from Treasury Secretary Jack Lew, although Pultz is not convinced the issue is currently a priority for President Obama in his last year in office.

Disclosure: the author holds no position in the stocks mentioned.