Viagra maker Pfizer is buying Botox maker Allergan in a record-breaking deal worth US$160 billion ($246 billion), created to cut the company’s United States tax bill by moving its headquarters to Ireland.
Advertisement
Both Pfizer and Allergan shares were down 2.1% in early trading in NY following the announcement.
Shares of Pfizer were down 3.3 percent, while Allergan fell 2.4 percent.
Soon after Sanders sent out his statement condemning the inversion, Hillary Clinton said that the merger would “leave us taxpayers holding the bag”, and she called on Congress to ensure those big corporations “pay their fair share”.
The US Treasury Department last week unveiled new rules to clamp down on inversions, its second attempt to do so since a wave of deals peaked in September 2014. The U.S. government has already lost billions of dollars in tax revenue from inversions, particularly in recent years.
The New York-based Pfizer and Dublin-based Allergan was in deal to have a merging that will make the biggest drugmaking behemoth in pharmaceutical history.
“Through this combination, Pfizer will have greater financial flexibility that will facilitate our continued discovery and development of new innovative medicines for patients, direct return of capital to shareholders, and continued investment in the U.S., while also enabling our pursuit of business development opportunities on a more competitive footing within our industry”, noted chief executive Ian Read.
The new merging will also focus on two separate aspects, one to focus on new breakthroughs and the other to market the existing ones. Pfizer stock owners will hold an approximately 56 percent stake in the combined company, while Allergan shareholders will own the remaining 44 percent.
Several U.S. drugmakers have performed inversions through acquisitions in the past several years, including generic drugmaker Mylan.
Allergan is best known for its Botox treatment but has also developed drugs in areas such as eye care, neuroscience and dermatology.
Tax inversions take place when a firm – in this case Pfizer – tries to change its tax domicile to a jurisdiction with a lower rate of corporation tax.
Gustav Ando, research director for IHS Life Sciences, a business information and consulting company, said that he thought the deal was carefully structured and likely to be approved, but said that it may receive even more scrutiny because of the concerns about high drug prices.
The deal will be neutral to Pfizer’s adjusted per-share earnings in 2017, add modestly to them in 2018 and boost them by about 10% in 2019. By tapping into Pfizer’s much larger geographic reach, Allergan can expand sales of its products, said Ashtyn Evans, healthcare analyst for Edward Jones.
In the past, Pfizer’s mergers have taken a heavy toll on CT, sometimes unfolding over years.
Advertisement
Representative Tom Price, one of few congressional Republicans to comment on Monday, said in a statement that more Treasury regulations will not solve the inversions problem.
