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Talk that Emerson may move to Ireland

Friday, June 27 16:08:15

There was speculation in the US online press today that US-based manufacturing technology giant, Emerson, is considering a move of domicile to Ireland.

The race to do corporate tax inversions, in which a U.S. company buys an overseas firm and then moves its legal domicile to that country, has become a modern-day gold rush, with companies hurrying to do deals before the US government slams the door shut, the St Louis Post Despatch online reported today.

Steven Winoker, an analyst with Sanford C. Bernstein in New York, thinks Emerson is among the companies that may be pursuing an inversion strategy.

In a recent report, he suggests that Emerson could invert by buying a company such as Eaton, which is managed from Cleveland, Ohio but legally based in Dublin.

Eaton became an Irish domiciled company by buying Cooper Industries in 2012, a move it said would save $160 million a year in taxes.

Alternatively, Winoker says, Emerson could buy Ingersoll-Rand, Tyco or Pentair, each of which has a legal base in lower-tax Ireland.

He also lists Honeywell and 3M as possible buyers but says Emerson "has the most to gain among our U.S. domiciled companies given their 30-plus-percent tax rate, and substantially all their cash held abroad."

Emerson's chief executive, David Farr, has complained in the past that high taxes put American companies at a disadvantage. The cash issue is an important one: U.S. companies have nearly $2 trillion in profits that they've booked overseas and are keeping there to avoid taxes.

Ken Crawford, a portfolio manager with Argent Capital Management in the US, says the appeal of an inversion is obvious to investors. The U.S. levies a corporate tax rate of 35 percent, among the highest in the world. Ireland charges just 12.5 percent, Switzerland 18 percent.

"To the degree that financially it makes sense, I'm surprised more companies have not done it, he said. "It's free money."

Among Argent's holdings are two Irish-domiciled drug companies, Mallinckrodt and Endo International. Mallinckrodt has a legal address in Dublin thanks to its former parent, Covidien, but its CEO and operating headquarters are in the US.