When offshore driller Transocean (NYSE: RIG ) announced in October that it was pulling up stakes and moving to Switzerland, I didn't think too much of it. In addition to reincorporating the company, top executives were going to relocate from Houston to Geneva. Having gone to school in the former city, I couldn't blame them for seeking a change of scenery.
Exiting the Western Hemisphere made some amount of operational sense for a global service company like Transocean. After all, something like 85% of the world's population is on the other side of the globe. Halliburton (NYSE: HAL ) pulled just such a move last year, when it sent off its CEO to set up shop in Dubai.
My perception of Transocean's move has changed as more and more companies have piled on to the Switzerland Express in recent weeks. The exodus includes everyone from fellow oil-service companies Weatherford (NYSE: WFT ) and Noble (NYSE: NE ) to infrastructure heavyweight Foster Wheeler (NYSE: FWLT ) and everything-but-the-kitchen-sink conglomerate Tyco International (NYSE: TYC ) . Something else is going on here.
These companies, not all of which are physically relocating their headquarters, are already incorporated in some of the most tax-lax locales on Earth, including Bermuda and the Cayman Islands. So it's not just a simple matter of dodging the new Democratic administration.
Instead, it's a complex matter of dodging the new Democratic administration. President-elect Obama co-sponsored a bill last year called the Stop Tax Haven Abuse Act, so we know where he stands. It appears that the companies perceive places like Bermuda -- which has no tax treaty with the U.S. -- to be politically vulnerable. Foster Wheeler explicitly cites "the risk of adverse tax law changes" in its SEC proxy filing.
Federal tax revenue is recoiling rapidly in today's environment, and I think the moves by these companies to reincorporate plays about as well as various companies' bouncing over to Bermuda did during the last recession. The public outcry back then was loud enough to persuade Stanley Works (NYSE: SWK ) to withdraw its plan. It will be intriguing to monitor the backlash this time around.