Inversion Subversion : Strong language from US Treasury Secretary is not yet a game changer

Senior UK Economist – Simon French +44 (0)20 7886 2753
Overnight the US Treasury Secretary, Jack Lew, announced rules designed to limit recent growth in corporate tax inversions. This has profound implications for the UK Biotechnology and Pharmaceutical sector which has been the main focus of takeover activity. Well-documented UK-based inversion targets have seen their shares take a hit in morning trade – AstraZeneca & Shire both (>5%. However we remain bullish for consolidation in this sector that stands to benefit from a rapidly ageing population and a government that has fostered an accommodating corporation tax regime. A deal in the US Congress on tax simplification – a red line for Republicans to sign inversion legislation – would appear unlikely in an increasingly hostile environment leading up to and beyond the US mid-terms. As such we remain bullish that inversion opportunities have not vanished but must now adapt to a more hostile political backdrop.


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