Despite the high-profile political and media frenzy targeting US corporations that move out of America to save taxes, toolmaker Stanley Works will go ahead with reincorporation to Bermuda after securing nearly 70 percent approval from shareholders in a vote yesterday.

Stanley said 67.2 percent of shares were cast in favour of the move - which will, by estimates, shave $30 million per year off Stanley's US tax bill - with slightly more than the two-thirds majority needed.

International news reports indicated however that the approval to move to Bermuda was not well received in the company's present home state of Connecticut, where Stanley has been headquartered for more than 150 years. With lingering economic uncertainty and the US involved in a war on terrorism, there is rising pressure in Washington to stop the tax shelter exodus.

Rep. James Maloney, D-Connecticut, said before yesterday's vote that Stanley was "engaged in a betrayal of Connecticut." "There has not been a day like this in this state since Benedict Arnold sailed to Bermuda," he said. Arnold conspired with the British during the war of Independence to betray the colonial stronghold at West Point, New York, then fled after the plot was uncovered. During yesterday's shareholder meeting in New Britain, about 30 protesters marched outside holding banners that read "Bless the USA" and handing out American flags.

Don D'Amato, president of Machinists Union Local 1433, blasted the company's executives during the meeting.

"I think this is a dirty deal," D'Amato said. "You're turning your back on the state of Connecticut and the United States."

Although the company said the move would enable the firm to better compete in the global market, and that savings would enable the company to retain thousands of American jobs, some shareholders would be hit with one-time tax increases as a result of the decision.

The reincorporation is structured in such a way that the Internal Revenue Service (IRS) will treat it as a sale of stock and some shareholders may therefore be faced with a tax bill.

It's as if "the sins of the company were visited on its shareholders," said Robert Willens, a Lehman Brothers managing director.

But in response, senior vice-president for investor relations, Gerard Gould said the company's large tax savings should increase earnings per share by about 35 cents, which is expected to drive shares higher. "It shouldn't take long for them (shareholders) to recover what they lost," he said.

Mr. Gould had told The Royal Gazette last month that despite the controversy the company would proceed with its move to Bermuda: "We are proceeding as planned. Comments of legislators and the media have not deterred us. What we have to do today is manage our company according to today's - not proposed - laws," he said.

Mr. Gould said the deal would generate $150 million in taxes for the government.

"We feel that's very patriotic," he said.

A 37-year employee of Stanley, machinist Stan Piorkowski, said the deal "is going to cost me my retirement." He holds 3,500 shares of Stanley, and said capital gains taxes on the deal would cost him between $30,000 and $50,000. Companies reason that the corporate tax savings will quickly outweigh the shareholders' tax liability as those savings result in higher earnings and ultimately a higher stock price.

The new corporate address would reduce Stanley's tax rate to about 24 percent from about 32 percent.

"The global playing field has been levelled, and our company is now better able to compete," Stanley chairman John M. Trani said. After the announcement of shareholder go-ahead, Stanley Works raised its earnings expectations for the full year to the range of $2.84 to $2.95 per share.

And its shares moved up by 62 cents, to $47.35 per share following the announcement yesterday, with incorporation on the Island reportedly to be finalised by end of business today.

Stanley Works "corporate inversion", as the reincorporation process has been dubbed, follows a similar move by diversified manufacturer Ingersoll-Rand which moved to the Island as of December 31, 2001, resulting in an estimated $40 million in saved taxes annually.

In addition, another US manufacturer, Nabors Industries, plans to move its domicile from Delaware to Bermuda. A shareholder vote is yet to be held on that move. Meanwhile, the push by some US legislators to close the "loophole" that allows US corporations to move incorporations to Bermuda and minimise global tax bills - actions that have been increasingly labelled as "unpatriotic" by American politicians and in the media - is being taken on head first by Finance Minister Eugene Cox in a visit to Washington this week, with two days of meetings "to assess, and to the degree possible, influence the discussion on the proposed new tax legislation being considered by the US Congress."

With federal lawmakers introducing legislation to crack down on the tax breaks, there is an increased risk that the tax benefits may not even materialise, state treasurer Denise L. Nappier argues. She said she would investigate whether state law governing the way pension funds are invested would require her to sell the Stanley shares.