Comment Because Taxes (Score 1, Interesting) 111
U.S. companies are worth more to foreign companies than to other U.S. companies because foreign companies pay lower income taxes. A U.S. company, Emerson, lost a bid to a French company, Schneider, for APC for that reason. As the WSJ states (free access to the paywalled article via FaceBook):
In 2006, Emerson sought to acquire a company called American Power Conversion (APC). This was a Rhode Island-based company that made more than half of its earnings outside the U.S. Unfortunately, Emerson competed against Schneider Electric, a French company, to acquire APC. Emerson offered more than $5 billion, but ultimately Schneider acquired APC by offering a bid in excess of $6 billion.
Why was Schneider willing to offer more? Schneider outbid us because France's tax code—typical of most OECD countries—exempts 95% of foreign-source income from taxation, while the U.S. tax code fully taxes such income. APC's profits were worth more to Schneider because, once absorbed, APC's global profits (net of the taxes paid in the countries where those profits were earned) could be repatriated to Schneider's headquarters in France, where they would be taxed at less than 2%.
In contrast, earnings repatriated to the U.S. are subject to a tax rate of nearly 40%, with a credit for taxes paid abroad on that income. That dramatic difference made it possible for Schneider to offer more for APC. So what had once been an American company became French.