Mar 2, 2017
Lack of tax plan clarity could slow U.S. M&A: Fortis CEO
By Greg Bonnell
The lack of clarity around American tax plans will keep certain firms skeptical about mergers and acquisitions for a while, the chief executive of Fortis (FTS.TO) told BNN on Thursday.
Fortis itself has been a growth-through-acquisition story, with a particular focus on the United States. But the St. John’s-based electricity and gas utility is taking a wait-and-see approach as President Donald Trump and House Republicans propose big tax changes.
“The real concern we have is the tax rules, what they’re going to look like once they finally get through the House and the Senate,” Fortis CEO Barry Perry told BNN following a speech in Toronto.
“For now, we’re really probably not in the acquisition mode.”
Last fall, Fortis completed its US$11.3 billion acquisition of ITC Holdings, a Michigan-based utility with a 25,000 kilometres of transmission lines in the U.S.
“Until we figure that out, I think firms are going to be a little bit skeptical of acquisitions.”
Perry says it will take a year or so to digest the deal.
“Hopefully by that time we’ll have the tax rules straightened out, and we’ll see where we go from there,” he said.
And Perry says it’s not just Fortis that will sideline acquisition plans as the American tax agenda unfolds.
Among the changes proposed south of the border is eliminating the right to deduct interest payments from income. That House Republican plan would have a big impact on companies that use debt to finance acquisitions.
It is not clear how that fits into Trump’s overall tax plan, which has yet to be released. But such a move could help fund the big tax cuts Trump has pledged.
“That’s an important factor,” Perry said. “Until we figure that out, I think firms are going to be a little bit skeptical of acquisitions.”
