Wrangling Over Nabors' Corporate Inversion Nears An End

by Mike Godfrey, Tax-News.com, Washington

17 June 2002

On Thursday a federal judge in the United States closed the hearing which will decide whether a temporary restraining order is issued to prevent global land drilling contractor, Nabors Industries, from reincorporating in Bermuda.

On Friday, lawyers involved with the case said they were informed by U.S. District Court Judge Lee Rosenthal that she will deny the temporary restraining order sought by shareholders who filed a class-action suit trying to block the Bermuda move.

Nabors Industries is seeking to perform a corporate inversion in order to enjoy significant tax advantages which the company says would benefit its shareholders. However, there were concerns expressed when Nabors first announced the plan earlier this year, that the rights of shareholders would be compromised by a move to Bermuda (where they would have fewer rights to sue and recover damages from the company).

Nabors has also failed to adequately explain other possible negative consequences of the offshore move - for example, possible removal from the S&P 500, resulting in mutual funds selling their shares in the company, which would in turn result in depressed share prices - according to Lee Squitieri, the attorney acting on behalf of plaintiffs in the class-action lawsuit brought by Nabors shareholder, Steven Rosenberg.

However, although a significant minority of shareholders remain disgruntled by the planned move, the vast majority appear to be in favour of the offshore reincorporation proposals, the Wall Street Journal reported. Citing Richard Brusca, the attorney representing the land drilling contractor, the newspaper revealed that voting had already begun in anticipation of a favourable verdict on Friday, and that the vote was running 75% in favour of reincorporation.

Mr Brusca also told the newspaper that the company could be hurt if the vote is delayed, as the two variations on the 'patriot tax' theme currently making their way through Congress could reduce or remove the tax advantages of reincorporation.

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