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CF Industries May Modify Inversion After US Treasury Changes

by Mike Godfrey,, Washington

24 November 2015

CF Industries Holdings, Inc. (CF) and OCI N.V. (OCI) have announced that they remain fully committed to their previously announced USD8bn merger, despite a new US Treasury ruling intended to tackle corporate inversions, which was released on November 19.

Under the previously announced plans, the merger between the US-based fertilizer company and Dutch company OCI's European, North American, and global distribution businesses would have seen the creation of a new parent company domiciled in the UK. It would have thereby enabled the new group to take advantage of the UK's corporate tax rate, which is currently 20 percent.

Under such an arrangement, CF shareholders would have owned approximately 72 percent of the new company and OCI would have owned approximately 28 percent. It would therefore qualify under the US rule that at least 20 percent of a new group's shares have to be held by the foreign company's shareholders after a merger to allow US multinationals to move their tax residences abroad.

However, the measures being introduced under the new Treasury notice, which are intended to make it more difficult for US companies to undertake a corporate inversion, include a limitation on the ability of US companies to combine with foreign entities using a new foreign parent located in a "third country."

In that case, while stressing their commitment to the merger "due to its strong industrial logic, significant expected synergies, and value creation potential for shareholders," CF and OCI have confirmed that they "are jointly evaluating options to address the impact of the [Treasury] notice."

A statement from CF Industries said: "This evaluation includes exploring alternative structures for the combination, such as using a parent company in The Netherlands rather than one in the UK."

TAGS: compliance | tax | business | tax compliance | Netherlands | law | corporation tax | United Kingdom | multinationals | transfer pricing | tax rates | United States | tax breaks | regulation

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