Takeover Falls Through So: Cooper Industries Returns to Bermuda Incorporation Plans

NEW YORK, Feb 13 Reuters reported yesterday that electrical products maker Cooper Industries Inc. said on Wednesday it would return to its original plan of shifting its incorporation from the U.S. to Bermuda, a day after a potential suitor for the company walked away.

Cooper was planning its shift to the tax haven from Ohio last year, but it was put on hold after bigger rival Danaher Corp. expressed interest in bidding for the company.

But Cooper subsequently became embroiled in a clutch of asbestos suits forcing Danaher to abandon plans of making an offer.

Cooper said the reincorporation to Bermuda would reduce its overall annual tax payout to between 20 percent and 25 percent from a current 32 percent and boost its cash flow by $55 million and earnings per share by 58 cents.

Cooper's shares closed down 57 cents at $34.27 in Wednesday trading on the New York Stock Exchange.

On Tuesday, Danaher abandoned plans to make a bid for Cooper citing its asbestos liabilities and a tough business climate. The liabilities are linked to a unit it sold to Federal-Mogul Corp a few years ago, but Federal-Mogul has said it may not honor claims related to products made by that unit.

Federal Mogul is now in bankruptcy, after asbestos claims piled up against smaller companies it had acquired in the 1990s.

Cooper admitted on Wednesday that it had not only not received any definite proposals for the whole company but no other party had formally bid for any of its parts either.

``The tragic events of September 11, the bankruptcy of Federal-Mogul and a very difficult business environment intervened,'' said Cooper's chairman John Riley.

Cooper's incorporation in Bermuda follows a trend that many renowned U.S. companies, with substantial foreign operations, have picked up on in the last decade, to save on taxes and boost earnings.

Apart from saving on taxes, the regulatory environment in Bermuda is also considered to be more lenient than the U.S.

Diversified industrial group Tyco International led the pack in the late nineties and according to bankers it saved as much as $500 million in taxes in 2000 with its effective tax rate dipping to 25 percent from 36 percent.

More recently, Ingersoll-Rand Co another diversified manufacturer also announced it was shifting to Bermuda.

Cooper, whose headquarters will remain in Houston, said the reincorporation, expected by middle of this year, will help it to acquire more businesses abroad.

All shareholders in Cooper Industries Inc would have to exchange their shares for new shares in Cooper Industries Ltd.