CHICAGO, July 17, 2014 /PRNewswire/ --Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog includethe Mylan (Nasdaq:MYL-Free Report), Abbott Laboratories (NYSE:ABT-Free Report), Facebook, Inc (Nasdaq:FB-Free Report), Actavis plc (NYSE:ACT-Free Report) and Medtronic, Inc. (NYSE:MDT-Free Report).
Today, Zacks is promoting its 'Buy' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Wednesday's Analyst Blog:
Mylan (MYL) Joins the Tax-Inversion Wave
Mylan's (Nasdaq:MYL-Free Report) recent $5.3 billion all stock deal with Abbott Laboratories (NYSE:ABT-Free Report) has once again emphasized an increasingly important driver of M&A activity this year. Several factors have contributed to the seven-year high in M&A deal value. But recurrent foreign acquisitions by U.S. companies indicate that tax inversion is one of the major reasons.
Increase in M&A Activity
The lack of organic means of growth for many U.S. companies meant that mergers and acquisitions were the next best route to get bigger. The presence of large amounts of cash on corporate balance sheets, favorable credit markets, low interest rates and strength in the stock market provided a conducive environment for M&A activity to gather speed.
Some of the most notable deals include Facebook, Inc's (Nasdaq:FB-Free Report) $19.0 billion buyout of WhatsApp and Actavis plc's (NYSE:ACT-Free Report) acquisition of Forest Laboratories for $25.0 billion. Further, Medtronic, Inc. (NYSE:MDT-Free Report), the world's largest medical devices maker, acquired its Irish rival Covidien Public Limited Company for $42.9 billion.
What Is Tax-Inversion?
Medtronic's $42.9B acquisition of its Irish competitor in surgical technologies and global healthcare major Covidien plc is a good example of the tax inversion process. The deal was an effort to offset the impact of high U.S. corporate tax rate by shifting Medtronic's tax base overseas.
At 35%, the U.S. corporate tax rate is one of the highest rates in the world. A tax inversion involves the acquisition of a foreign company and subsequently adopting its home country's domicile. Alternatively, the combined entity can create a holding company in a country whose tax rate is lower.
This could help U.S. companies reduce their tax rates to single digits. The conditions attached to such a move specify that 20% of the stock of the resultant entity must be transferred to the shareholders of the company which has been acquired.
Popularity in the Healthcare Sector
The inversion wave has affected the healthcare sector the most. Medical devices and pharma companies are rapidly acquiring smaller foreign competitors for two major reasons. Firstly, the industry has been a natural leader in the M&A space. This is because it is usually easier for a large corporation to purchase small companies than to develop new drugs indigenously. Secondly, the market for drugs is truly international.
Additionally, several large pharma companies already have considerably large international profits. Tax inversion removes the necessity of repatriating such profits, making them subject to a higher tax rate. A strong European pharma sector also makes for several potential targets.
Major Deals This Week
Ultimately, as several healthcare companies conclude inversion deals, others are pressured to follow suit. This week alone markets received news of two such massive deals. Mylan will acquire Abbott Labs' branded specialty and generics business in developed ex-U.S. markets for $5.3 billion. The new company, organized in the Netherlands, will be headed by Mylan's present leadership group.
Mylan stated in its press release that in the first full year following closure, its tax rate will be in the range of 20% to 21% and decline further (high teens) going forward. The formation of the combined entity is expected to result in more than $200 million in pre-tax operational efficiencies by the end of the third year.
Today, Zacks is promoting its 'Buy' stock recommendations. Get #1Stock of the Day pick for free.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.
Get the full Report on MYL - FREE
Get the full Report on ABT - FREE
Get the full Report on FB - FREE
Get the full Report on ACT - FREE
Get the full Report on MDT - FREE
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
http://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumedthat any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein andis subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Logo- http://photos.prnewswire.com/prnh/20101027/ZIRLOGO
SOURCE Zacks Investment Research, Inc.
