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| 2003
News and Press Releases |
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HEADLINE:
Can Tyco Afford To Leave Bermuda?
By: Tim McLaughlin
Place Source. Month DD, YYYY
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EXCERPT: This island of pink sand and light blue water may be a great place for a honeymoon, but it will be a short one for Tyco International Ltd.'s TYC.N new slate of directors. The new board -- gathering for the first time on Thursday at Tyco's annual shareholder meeting in Bermuda -- already faces intense pressure from investors fighting over the company's offshore incorporation. A group led by Calpers, the largest U.S. pension fund, wants Tyco to abandon its tax-saving Bermuda charter and return to the United States to give shareholders more protection against corporate dishonesty. Tyco's stock collapsed last year when New York prosecutors brought criminal charges against four former senior leaders. U.S. lawmakers are working to close offshore loopholes and some question the patriotism of companies that set up the equivalent of mailbox drops to minimize U.S. taxes. But Wall Street and some of Tyco's largest investors support Tyco's Bermuda charter. When Tyco moved offshore in 1997, shareholders paid an estimated $1 billion in taxes in a deal engineered by indicted former Chairman Dennis Kozlowski. Tyco General Counsel William Lytton recently told Institutional Shareholder Services, a watchdog group that opposes the Bermuda charter, that a move back to the United States could take up to three years because the conglomerate has more than 2,000 subsidiaries spread throughout the world. And shareholders may again be subjected to tax penalties, ISS said, citing another concern raised by Tyco. Hedge fund manager Leon Cooperman, chairman of Omega Advisors Inc., warned that leaving Bermuda could undermine Tyco's financial health. Tyco has little cash cushion as it pays some $11 billion in debt coming due this year. J.P. Morgan Securities analyst Donald MacDougall estimated a U.S. reincorporation would reduce Tyco's annual earnings by 12 cents a share. He values the Bermuda incorporation at more than $5 a share, or an estimated $10 billion.
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