TOUGH new U.S. rules on corporate “inversion” deals, aimed at making the tax-avoidance transactions less desirable, undermined share prices in nearly a dozen companies on both sides of the Atlantic on Tuesday.

    Analysts and tax lawyers were studying the damage to deals currently in the works and the outlook for future such deals, in which U.S. companies escape high taxes at home by shifting their domiciles abroad.

    Although the new rules will make some deals costlier and others more difficult, fast-food chain Burger King Worldwide Inc. said it will proceed with its US$11.5 billion transaction with Canada’s Tim Hortons Inc.

    “This deal has always been driven by long-term growth and not by tax benefits,” the two companies said in a statement.

    Corporate deal-makers were surprised by harsher-than-expected changes to the inversions rulebook unveiled by the U.S. Treasury Department late Monday. Inversions have surged this year and caused concern in Washington about the threat they pose to the U.S. corporate income tax base.

    Rule changes include blocking what the Treasury dubbed “creative” strategies to move cash around or to bring overseas profits into the United States without paying U.S. taxes, and redefining inversions to make shifting tax domiciles more difficult.

    Effective immediately, the rules will mean little for companies that have already inverted. But for at least 10 companies in the midst of completing deals, and for those considering inversions, the impact could be significant.

    Tax experts said the rules would have the biggest impact on companies that invert to gain lower-cost access to unrepatriated profits, or earnings held overseas to avoid U.S. taxes.

    Burger King was not in this situation, said Ken Kies, managing director of Washington tax lobbying firm Federal Policy Group. “It really depends on whether or not a favorable tax treatment of unrepatriated earnings was a key aspect of the economics of your deal,” he said. “If it wasn’t, then what they’ve done here won’t have much of an impact.”

    Still, most pending deals could become more costly for the buyers. They include AbbVie Inc. and its US$54.7 billion deal to acquire Ireland’s Shire Plc., as well as Medtronic Inc. and its US$42.9 billion takeover of Covidien Plc.

    Neither of those transactions, the biggest of the year, was expected to fall apart completely, partly because paying a break-up fee to walk away would likely be even more costly. AbbVie would have to pay Shire a US$1.6 billion penalty if it were to renege on their merger agreement, for instance.(SD-Agencies)