Tuesday, March 31, 2015

POSTED: Monday, March 30, 2015, 4:47 PM

Every time the DuPont Co. sells or spins off a business from its century-old monolithic headquarters abve the Hotel du Pont on central Wilmington's Rodney Square, a new company goes forth to settle in some other community. Drugmaker Endo International, spun off by DuPont and Merck in 1997, left Wilmignton for Malvern, though for tax and legal purposes it's now based in Ireland. Invista, the textile business that brought us nylon, Teflon and Stainmaster, is owned by Koch Bros. and based in Wichita, with a research lab in Newark, Del.

The company's latest round of reorganization could create several global headquarters. Where will they go?

Axalta Coating Systems, spun off in 2013, is currently headquartered in Brandywine Realty Trust's Commerce Plaza at 2001 Market St. in Center City, with back offices in Glen Mills and Wilmington. Chemours, DuPont's titanium dioxide business, is slated to spin off this year, initially into DuPont's current headquarters. Both are being avidly courted for new sites, in the Philadelphia area and beyond. "While we are exploring options in multiple locations, a decision on location has not been made," DuPont spokesman Daniel Turner said, of Chemours.

POSTED: Monday, March 30, 2015, 1:30 PM

Berry & Homer, which prints ads on fabric to wrap around vehicles and buildings, is leaving its home in Philadelpha's Port Richmond for new quarters in Pennsauken, after New Jersey approved a $3.14 million, 10-year tax incentive so the firm can buy the building for $1.3 million.

The 27,000 square foot warehouse Berry & Homer is taking over, at 7150 Westfield Ave. was used most recently to store Camden County voting machines, says broker Ian Richman, who closed the deal with colleague Marc Isdaner of Colloers International. They represented the seller, Bloom Organization. Berry & Homer chief executive Joe Thompson wasn't immediately available for comment. Berry & Homer is leaving its old address, 2035 Richmond St.

So many companies have gotten state aid to move to Camden that the former factory city is running out of suitable small-business industrial sites, and vacant locations in Pennsauken are also filling up, Richman told me. Grow New Jersey tax credits, like the ones given to Berry & Homer, have been used to lure Cooper Health, Holtec International, Philadelphia 76ers and Subaru of America operations from nearby locations into the City of Camden. The program has also benefited sites in Pennsauken directly by attracting a string of smaller companies to qualified properties, Richman added.

POSTED: Monday, March 30, 2015, 12:52 PM

Death, taxes, and tax-law changs: Hre's what's different this year, say the bean-counters at Global Tax Management, Radnor. Theyve listed a string of U.S. and Pennsylvania business-tax-law revisions for the just-passed corporate deadline:

The federal Tax Law Extenders Bill (also known as H.R. 5771, "Tax Increase Prevention Act") expanded and extended a string of federal tax breaks; while Pennsylvania has changed the way it taxes businesses with income from more than one state, and clamped down on the use of Delaware holding companies to avoid taxes on patents, trademarks and other intellectual properties. Highlights:

 1) Research & Development Credits - These tax breaks, which reduce federal income tax liability for research that meets IRS guidelines "on a dollar-for-dollar basis," can save "significant dollars" for companies developing new products. The credits have been extended through 2014. Companies need to be "continually tracking, recording, and retaining contemporaneous documentation supporting research-related expenditures” to qualify, according to Kevin Wilkes, lawyer and Senior Tax Manager at GTM. 
 2) Bonus Depreciation Deduction - Taxpayers can deduct half the cost of corporate jets and certain other assets acquired between the start of 2005 and the end of 2014 -- even if the equipment isn't delivered until sometime this year. Compare this deduction to Section 179 depreciation, which applies to fewer purchases.
 3) 100 Percent Exclusion of Stock Gains - Congress has agreed to exclude stock gains for the owners of small-business stock acquired in 2014, "dramatically reducing their tax liabilities."  
 4) Built-in Gains Tax for S Corporations - The IRS used to tax gains on shares of personal S-corporations for 10 years after they were converted from standard C-corporations, to discourage owners from reorganizing jus tto avoid taxes. But conferted firms that show value gains in 2011-14 don't have to pay the tax if they passed at least four previous years without reporting gains.
 5) Reduced Tax Liabilities for Multinationals - The IRS used to tax dividends, interests, rents and royalties transferred between foreign units of U.S. companies, including "personal holding companies." But Congress's "look-thru rule" allows companies to make these transfers tax-free for 2014, says GTM President Dave Laurinatis. "This rule can significantly reduce a U.S. multinational conglomerate’s tax liability." 
 6) Pennsylvania multi-state income tax apportioning: Since 2014, "services revenue is now allocated to Pennsylvania if the service is delivered to a location in Pennsylvania," GTM says. “For businesses with significant services revenue, this legal change could significantly modify their Pennsylvania taxable income,” said Chau Tran, newly appointed director of GTM’s State & Local Tax Practice Team.
 "Services revenue is now allocated to Pennsylvania if the service is delivered to a location in Pennsylvania...   Businesses that derive significant revenue from services delivered to Pennsylvania customers should be mindful that their Pennsylvania tax liabilities could materially increase. Whereas the opposite could be true of businesses that derive relatively little revenue from services delivered to customers located in Pennsylvania."
 7) “Delaware Holding Companies” - Delaware doesn't tax "passive income" from patents, trademarks and other intellectual property. Big companies have long organized Delaware subsidiaries to collect intellectual property fees from stores and other locations in many states, avoiding local income taxes in many states. But since Jan. 1, Pennsylvania is disallowing some "intercompany expenses attributable to intangible assets."  Warns GTM: "Corporate groups with intangible assets housed within Delaware Holding Companies should be aware that the tax liability associated with such a structure is about to increase significantly."

POSTED: Monday, March 30, 2015, 12:00 PM
A Save-A-Lot store in St. Louis, Missouri, U.S., on Thursday, May 20, 2010. Photo: Peter Newcomb (Bloomberg)

Discount grocer Save-A-Lot plans five new Philadelphia-area stores. The chain has found two new locations in North Philly, at 7th and Lehigh and 5th and Allegheny; another on Knights Road in the Northeast; and one each in Norristown and Lindenwold.  Save-A-Lot is also adding stores in Bridgeton, N.J., and Lebanon, Pa., says broker Metro Commercial Real Estate, whose broker Michael Murray found the locations.

Save-A-Lot operates 1,300 U.S. stores including at least 10 in Philadelpha and its closest South Jersey suburbs. Of the new stores, the city locations are each around 17,000 sqare feet; Norristown is larger, at 19,500 sf; Lebanon is the smallest of the group at 15,000 sf. Save-A-Lot is owned by U.S. grocery holdings giant SuperValu Inc. (a former owner of Acme Markets, which is now co-owned by Cerebrus Capital, Philadelphia's Lubert-Adler Partners and other investors). 

Separately, rival Aldi's said last week it is converting 30 stores of the former Bottom Dollar chain, including 14 in Philadelpha and its suburbs. Aldi's, owned by a branch of Germany's Albrecht grocery family (another branch owns Trader Joe's), bought 66 Bottom Dollar stores for $15 million last year as they were shut down by their owner, Europe's Delhaize Group. Delhaize had opened the Bottom Dollar stores in Pennsylvania, New Jersey and Ohio in 2009-14, hoping to cash in on the U.S. recession that drove shoppers to hunt for bargains. 

POSTED: Friday, March 27, 2015, 12:20 PM

Discount grocer Aldi says it will reopen 30 of the 66 former Bottom Dollar stores it took over in Pennsylvania, South Jersey and northeast Ohio after past owner Delhaize Group shut Bottom Dollar last year. 5 ex-Bottom Dollar stores in Philadelphia and 14 in the suburbs will reopen; 4 of Bottom Dollar's Philadelphia stores will stay shut, along with 13 in the suburbs. 

Aldi, an Illinois-based U.S. arm of Germany's Albrecht family grocery conglomerate, said in 2013 it planned to spend $3 billion adding 650 new stores and 10,000 store, warehouse and office staff by 2018, bringing its total to almost 2,000 stores. The company "will continue working with" 36 ex-Bottom Dollar communities where it doesn't plan new stores "to ensure a new transition," Aldi CEO Jason Hart said in a statement. 

Hart added that Aldi pays "generous compensation that is higher than those of other grocery retailers in the market," plus "full health benefits" for workers who put in over 25 hours a week. The company advertises $11.25 an hour for starting clerks, and says it will have a hiring fair in Abington on Monday March 30. The company lacks a worker pension plan but does offer a worker-paid 401(k) retirement investment plan. Aldi plans to reopen these ex-Bottom Dollar stores: (lists follow)

POSTED: Thursday, March 26, 2015, 4:51 PM

The Joint Hearing on Medical Marijuana (yes, they called it that) at Pennsylvania Hospital on Tuesday attracted 20 state legislators and leaders of the Health and Judiciary committees. That's 1/10 of the state House of Representatives. Most were from the ruling Republicans.

Most of the elected officials who spoke -- the people's reps -- said they are inclined to favor pot legalization because they have constituents who say pot has helped them, or hope it would. 

Against them, doctors who lead U.S. and Pennsylvania medical societies -- the men of science -- said they oppose state reps' sweeping proposals to let people try to medicate many painful conditions with marijuana, because there is so little measurable proof the weed is good, and not bad, for humans, even for sick people.

POSTED: Thursday, March 26, 2015, 4:31 PM

Philadelphia International Advisors, a 13-year-old, $1.7 billion-asset Center City-based investment firm for pension plans and other large investors, will close at the end of June, Joe Langella, director of managed accounts, confirmed to me in an email.

The shutdown "is related to the decision by Founder and President Andrew Williams to retire for health reasons," according to Pensions & Investments magazine's daily online-subscriber edition, citing the City of Sarasota Firefighters' Pension Board, which was informed of the shutdown earlier this week.

PIA managed $3 billion when Williams and his colleagues separated from Glenmede Trust to form PIA in 2002. PIA's quantitative investor group has moved to Segall Bryant & Hamill Investment Counsel, a Chicago firm.  

POSTED: Wednesday, March 25, 2015, 3:54 PM

Billionaire activist Nelson Peltz today named four allies of DuPont Co. chairman-CEO Ellen Kullman he wants eliminated from the Wilmington bio/chemical/materials company by himself and three allies in a scheduled May 13 contested board election:

- Alexander M. Cutler, CEO of power-equipment manufacturer Eaton, and DuPont's lead director. He's also a leader of the Business Roundtable, a corporate lobby group, and a director of KeyCorp, one of the natoin's biggest banks.
- Robert A. Brown, President of Boston University, a formre chemical engineering prof at MIT
- Lois D. Juliber, retired vice chairman and Chief Technology Officer at Colgate-Palmolive. A past director of Goldman Sachs, which has been advising DuPont in its defense against Trian's attempted takeover, Juliber was, ironically, nominated to the Kraft Board of Directors by Peltz's Trian Fund Management (corrected) in a 2007 takeover bid that has resulted in the sale or shutdown of former Kraft plants, including the one in Northeast Philadelphia. But now Trian wants her out at DuPont.
- Lee M. Thomas, retired CEO of lumber giant Rayonier. He also headed the EPA under President Ronald Reagan.

To replace these directors on DuPont's 12-member board and boost cash flow to shareholders more rapidly than he thinks Kullman is able or willing to do, Peltz and Trian: nominate; himself, a veteran activist shareholder who has targeted a series of U.S. companies (including Kraft and H.J. Heinz, which now plan to merge) for cost-cutting, asset sales and reorganization to boost investor profits; John H. Myers, ex-chief executive of GE Asset Management; Arthur B. Winkeblack, ex-CFO of H.J. Heinz; and Robert J. Zatta, acting CEO at Princeton-based chemical maker Rockwood Holdings Inc.

About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

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