Hillary Clinton calls Johnson Controls-Tyco inversion 'outrageous'
DES MOINES , Iowa (Reuters) -- Hillary Clinton called the planned inversion by Johnson Controls and Ireland-based Tyco "outrageous," and said as president she would block such moves using an "exit tax."
"These efforts to shirk U.S. tax obligations leave American taxpayers holding the bag while corporations juice more revenues and profits ," Clinton said in a statement.
"I have a detailed and targeted plan to immediately put a stop to inversions and invest in the U.S., block deals like Johnson Controls and Tyco, and place an 'exit tax' on corporations that leave the country to lower their tax bill."
Johnson Controls announced on Monday a plan to buy Tyco for $16.5 billion, which the companies said will save $500 million in taxes in the first three years and an additional $150 million a year through tax synergies.
U.S. Sen. Bernie Sanders, a Vermont Democrat also seeking the party’s presidential nomination, said the merger “would be a disaster for American taxpayers.”
“If you want the advantages of being an American company then you can’t run away from America to avoid paying taxes,” Sanders said in an e-mailed statement.
The corporate tax rate in Ireland, where the new Johnson Controls Plc will be based, is 12.5 percent, among the world’s lowest, compared with 35 percent in the U.S., the highest in the developed world.
Certain corporate tax laws mean an independent U.S. company could end up paying more taxes than an identical U.S. company owned by a foreign parent. Since 1982, more than 50 American companies have reincorporated in low-tax countries.
Tyco, which is based in Ireland and run from Princeton, N.J., is a maker of commercial fire and security systems with a stock-market value of $13 billion as of Friday. The combined company will have its primary operational headquarters in North America in Milwaukee.
Shareholders of Johnson Controls will own about 56 percent of the combined company and receive aggregate cash consideration of about $3.9 billion, the companies said in a statement Monday. The companies expect the deal to close by the end of September. Johnson Controls shareholders may choose one share of the combined company or $34.88 a share in cash.
Johnson Controls is continuing with its plan to spin off its automotive-seating operations by the end of the year into a company called Adient.
A consummated deal would complete the transition of Johnson Controls from a diversified manufacturer of auto parts, batteries and building controls into two more focused companies. A merger also would end of one of the last vestiges of Tyco, the onetime conglomerate that divided into multiple companies after former CEO Dennis Kozlowski was forced out in 2002 and later went to prison.
Johnson Controls has been trying to reduce its reliance on the auto-parts industry, which accounted for about 54 percent of its fiscal 2015 sales. Molinaroli will remain chairman and CEO of the combined company for 18 months after the closing, while Oliver serves as president and chief operating officer, as well as director. Then Oliver will become CEO while Molinaroli serves as executive chairman for a year, until Oliver takes both roles.
Still in autos
After the merger, Johnson Controls and Tyco will have a formidable automotive battery business for both automakers and the aftermarket. The business accounted for 18 percent of JCI's revenue during its last fiscal year, which ended Sept. 30.
"The combined company will have one of the largest energy storage platforms with capabilities including traditional lead acid as well as advanced lithium ion battery technology serving the global energy storage market," the company's statement said.
Last fiscal year, the battery business posted operating income of $1.15 billion, up from income of $1.05 billion in 2014. Total revenue fell slightly to $6.59 billion from $6.63 billion the previous fiscal year.
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