Stanley Works Leaves The US: Unpatriotic?

by Mike Godfrey, Tax-News.com, New York

10 May 2002

While Congress begins to craft legislation to reverse the flow of US corporations to more tax-friendly jurisdictions offshore, the companies themselves aren't waiting to learn the outcome of any legislation. Yesterday the latest emigre, Stanley Works, announced that its shareowners had approved a plan to change its place of incorporation from Connecticut to Bermuda by a vote of 57.3 million (79% of those voting) "for" the proposal to 14.9 million "against," with 1.0 million abstaining and 12 million shares not voted.

John M. Trani, Chairman and Chief Executive Officer, said: "Our shareowners have strongly affirmed the benefits of re-incorporation: creating greater operational flexibility, enabling better management of international cash flows and helping us deal more effectively with our complex international tax structure. The global playing field has been leveled, and our company is now better able to compete."

This summarises the arguments of companies which have extensive world-wide operations and have to compete against firms from other, tax-friendlier countries than the US. But that's not how legislators see it. Ranking Democrat and Republican members of the Senate Finance Committee, Max Baucus (Dem. Montana) and Charles Grassley (Rep. Iowa), cast departing companies as unpatriotic (for wanting to pay less tax?) and have introduced the Reversing the Expatriation of Profits Offshore (REPO) Act which will block companies from renouncing their US corporate citizenship simply by setting up a shell office abroad.

Under the Stanley Works' plan, which management expects to be implemented by the end of today, The Stanley Works, Ltd., a newly formed Bermuda corporation, will become the parent company of The Stanley Works. Shareowners of The Stanley Works will receive the same number of shares of The Stanley Works, Ltd. as they hold in The Stanley Works. These shares will have substantially the same attributes as The Stanley Works common shares, and will be listed on the New York Stock Exchange under the symbol SWK, the same symbol under which the company's stock currently trades.

The Stanley Works, an S&P 500 company, is a worldwide supplier of tools and doors and related hardware products for professional, industrial and consumer use. To reflect benefits of the reincorporation, management upgraded its full-year guidance to $2.84 - $2.95 per share (up 23% - 28%), with a bias toward the higher end of the range.

Recommended