By GILES PARKINSON
It took James Hardie an extra three years, but it finally found a way to call itself anything but Australian.
The building products company has become one of Australia's most successful overseas investors, creating a hugely profitable business in the United States by becoming a market leader in plasterboard construction.
Its problem, like many others, has been Australia's punitive tax regime, which James Hardie estimates hits it with an extra $A30 million ($37 million) of tax in a single year. That's a significant amount to a company with a net profit of $A79 million.
It had a go at a restructure and a move of its domicile overseas in 1998, but its plans included an initial public offering in the US and these were unhinged by a sudden distaste for building stocks and a fascination with anything high-tech.
Plasterboard just didn't rate.
Its operational headquarters have since moved to California, but this has not solved the company's vexing tax problem.
This time James Hardie has forgone the IPO route and instead will create a Netherlands-based parent company, while its American Depository receipts will be listed on the New York Stock Exchange to comply with the US-Netherlands tax treaty.
Its annual general meeting will be held in Amsterdam.
Australia's inability to move its tax and other regulatory regimes into line with overseas standards has forced other companies to pursue their own avenues to cope with the demands of being an international company.
BHP and Brambles, frustrated by their restricted access to equity markets and a lack of recognition from overseas fund managers, have pursued the dual-listed-company concept to engineer mergers worth $A57 billion and $A20 billion, respectively.
Plenty of others have indicated that they, too, are mulling different opportunities. AMP, National Australia Bank and building products company CSR have all raised the prospect of moving their domicile overseas or finding some sort of dual-listing structure that will lighten the burden on either the companies themselves or their shareholders.
The heart of the problem is the ability of Australian companies to pay franked dividends as more of their earnings come from overseas. Any money overseas and distributed to shareholders cannot be franked.
This poses a problem. The primary listing of many of these companies remains Australia. Their earnings (85 per cent of them in the case of James Hardie) are being made overseas. Either this money is not being repatriated and is being reinvested into these foreign-based businesses, or it is being filtered back to the shareholders and taxed heavily along the way.
The Australian Government is being called on to act. The savings that can be extracted by James Hardie will be tempting to others, and there are a host of companies that now make more than half their income overseas - including the likes of Foster's.
Australia's great fear is of becoming a branch office economy. How, then, would it describe James Hardie's offices in Sydney after the proposed restructure?
For now, James Hardie's shareholders don't care. Their shares jumped nearly 10 per cent to a record high after the announcement.
* Giles Parkinson edits AFR.com
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