Gov't Pensions Make Big Bucks Off 'Corp Deserters'

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Published August 05, 2014

| FOXBusiness

It’s not just fat cat hedge funds, banks or Wall Street investment companies that benefit when U.S. companies cut their tax bills by moving their headquarters overseas via mergers with foreign concerns.

More than a dozen state government pension funds that run retirement accounts for government workers like teachers, cops and firemen own big chunks in these “corporate deserters,” too.  

Five U.S. companies merging with overseas concerns have big state government pension investments amounting to nearly $2 billion, based on data provided by Richard Peterson, senior director at S&P Capital IQ.

But you don’t hear about government pension investments in the criticism about this tax-cutting move from Democrats in Congress and the president, who have repeatedly called companies seeking to reduce their high U.S. corporate taxes “corporate deserters” who are moving jobs overseas, destroying the middle class and ruining the U.S. corporate tax base (the government estimates $20 billion over 10 years is at stake here).

The OECD says the U.S. corporate tax rate is the highest in the world, higher than what many European companies pay, which economists note is cutting into U.S. job growth. That’s why there is a bipartisan push for U.S. corporate tax reform.

To be sure, $2 billion is a drop in the ocean of government pension fund assets. The current value of Calpers’ assets alone is estimated at $301 billion. But the corporate inverter stakes are part of the controversy of D.C. pressuring Wall Street fat cats while overlooking discomfiting government pension investments.

State government workers have invested in several corporate inverters, including: Mylan Labs, which is buying Abbott Laboratories’ non-U.S. generic drugs business for $5.3 billion, with the new entity based in the Netherlands; Walgreen Co, (WAG) which is buying a $6.7 billion stake in Switzerland’s Alliance Boots and may move to Switzerland if it buys the rest of the company; Medtronic, which is buying Dublin-based Covidien for $42.3 billion; Applied Materials, which bought Tokyo Electron Limited for $9.4 billion, with the merger, Eteris, based in the Netherlands; and Illinois-based AbbVie’s $54.9 billion acquisition of the U.K. drug maker Shire PLC, which “ranks as the largest announced to date corporate inversion deal,” and will be based in Great Britain, S&P Capital IQ’s Peterson says.

Government worker pension funds for Ohio, California, New York, New Jersey, and teacher funds in California and New York have invested in all of these U.S. “corporate inverters.” Other state government pension funds from Kentucky, Arizona, Virginia and Texas have also each piled into individual names.

Calpers, the New York State Common Retirement Fund, and California’s and New York’s teacher pension funds rank at the top of these companies’ biggest pension investors. State government pension funds own more than $1.14 billion in Walgreens, and $1.3 billion in AbbVie, S&P Capital IQ’s Peterson says.

Wall Street analysts already estimate that Walgreens could cut its U.S. tax bill by one-third with a merger that sits in Switzerland, or a projected $4 billion that could flow back to the bottom line over the next five years—helping the government workers’ return on their investments. When Applied Materials announced its deal for Tokyo Electron, it said that its effective tax rate would drop to 17% from 22% as a result, for an estimated savings of hundreds of millions of dollars annually.

Largest pension investors in AbbVie Inc.  

Latest Holders    
Holder

Common Stock Equivalent Held

Market Value (USD in mm)

New York State Common Retirement Fund

                                                4,506,187

                                                236.5

California Public Employees' Retirement System

                                                4,380,368

                                                229.9

New York State Teachers' Retirement System

                                                3,269,438

                                                171.6

Stichting Pensioenfonds ABP (Netherlands)

                                                3,069,335

                                                161.1

The California State Teachers Employees' Retirement System

                                                2,880,968

                                                151.2

State of New Jersey Common Pension Fund

                                                1,561,000

                                                  81.9

State Teachers Retirement System of Ohio

                                                1,487,324

                                                  78.1

Canada Pension Plan Investment Board

                                                1,349,680

                                                  70.8

Ohio Public Employees Retirement System

                                                1,230,336

                                                  64.6

Arizona State Retirement System

                                                   655,966

                                                  34.4

Largest pension investors in Walgreen Co. 

Latest Holders    
Holder

Common Stock Equivalent Held

Market Value (USD in mm)

New York State Common Retirement Fund

                                   2,835,841

                                                         200.0

Stichting Pensioenfonds ABP (Netherlands)

                                   2,708,491

                                                         191.0

California Public Employees' Retirement System

                                   2,481,640

                                                         175.0

Canada Pension Plan Investment Board

                                   1,967,267

                                                         138.8

New York State Teachers' Retirement System

                                   1,816,411

                                                         128.1

The California State Teachers Employees' Retirement System

                                   1,723,559

                                                         121.6

Teachers' Retirement System of the State of Kentucky

                                      895,230

                                                           63.1

Ohio Public Employees Retirement System

                                      736,651

                                                           52.0

State Teachers Retirement System of Ohio

                                      607,150

                                                           42.8

State of New Jersey Common Pension Fund

                                      436,800

                                                           30.8

Mylan Inc.

Latest Holders

 

 

Holder

Common Stock Equivalent Held

Market Value (USD in mm)

State Teachers Retirement System of Ohio

                                 2,676,927

                                                            131.8

California Public Employees' Retirement System

                                 1,410,147

                                                              69.4

New York State Common Retirement Fund

                                 1,329,834

                                                              65.5

New York State Teachers' Retirement System

                                    744,158

                                                              36.6

The California State Teachers Employees' Retirement System

                                    693,262

                                                              34.1

Stichting Pensioenfonds ABP

                                    304,811

                                                              15.0

State of New Jersey Common Pension Fund

                                    263,255

                                                              13.0

Public Employees Retirement Association of Colorado

                                    255,404

                                                              12.6

Employees Retirement System of Texas

                                    250,000

                                                              12.3

Virginia Retirement System

                                    180,882

                                                                8.9

Medtronic Inc.

Latest Holders

 

 

Holder

Common Stock Equivalent Held

Market Value (USD in mm)

California Public Employees' Retirement System

                                      2,963,212

                                                   182.2

New York State Common Retirement Fund

                                      2,822,228

                                                  173.5

New York State Teachers' Retirement System

                                      2,081,461

                                                   128.0

The California State Teachers Employees' Retirement System

                                      1,848,224

                                                   113.6

State Teachers Retirement System of Ohio

                                      1,693,800

                                                   104.1

Stichting Pensioenfonds ABP

                                      1,532,497

                                                     94.2

Ontario Teachers' Pension Plan

                                      1,068,397

                                                     65.7

Ohio Public Employees Retirement System

                                         826,543

                                                     50.8

State of New Jersey Common Pension Fund

                                         740,000

                                                     45.5

Employees Retirement System of Texas

                                         380,000

                                                    23.4

Applied Materials

Latest Holders

 

 

Holder

Common Stock Equivalent Held

Market Value (USD in mm)

California Public Employees' Retirement System

                               4,806,184

                                                   101.4

New York State Common Retirement Fund

                                4,742,218

                                                  100.0

Stichting Pensioenfonds ABP

                                2,680,635

                                                   56.5

New York State Teachers' Retirement System

                                2,338,306

                                                   49.3

The California State Teachers Employees' Retirement System

                               2,185,847

                                                   46.1

State of New Jersey Common Pension Fund

                                1,800,000

                                                     38.0

Teachers' Retirement System of the State of Kentucky

                                1,333,900

                                                     28.1

Ontario Teachers' Pension Plan

                                   565,174

                                                     11.9

Public Sector Pension Investment Board

                                   443,347

                                                     9.4

Ohio Public Employees Retirement System

                                   405,730

                                                    8.6

 

URL

http://www.foxbusiness.com/economy-policy/2014/08/05/govt-pensions-make-big-bucks-off-corp-deserters/