Allergan, which is headquartered in Dublin and known for producing Botox, will likely be the legal buyer in this case so it can help New York-based Pfizer lower its American tax rate.
Advertisement
The deal, the largest ever in the health care sector, is sure to draw political ire in a US presidential election year because Pfizer would redomicile to Ireland, where Allergan is registered, in a so-called “inversion” that would slash its corporate tax rate.
United States drugs giant Pfizer has sealed a deal to buy Botox-maker Allergan for $160bn (£106bn) in what is the biggest pharmaceuticals deal in history.
Despite the obvious moves of US companies including Pfizer for tax avoidance according to The Guardian, the U.S. Government remains to be still and are just waiting for new legislation to come up to finally make restrictions from all the inversions happening.
Allergan stockholders will receive 11.3 shares in the combined company for each Allergan share, and Pfizer’s will receive one share in the new company for each old Pfizer share. Pfizer stock owners will hold an approximately 56 percent stake in the combined company, while Allergan shareholders will own the remaining 44 percent.
“The combination of Allergan and Pfizer is a highly strategic, value-enhancing transaction that brings together two biopharma powerhouses to change lives for the better”, said Saunders.
The two companies have been in talks for a number of weeks.
The current iteration of Allergan is the result of 2014’s largest pharma merger, where Actavis purchased the former company for about $65 billion.
The agreement involves 11.3 Pfizer shares per Allergan share, in addition to a few cash. Still, despite the effort by the tax authorities to tighten the inversion rules, when Umer Raffat, Evercore ISI Research Analyst, was asked by a Bloomberg journalist if the deal will going to get through he replied that “yes” the deal will pass. Last year, when it tried unsuccessfully to acquire British drug maker AstraZeneca, Pfizer didn’t hide the fact that tax savings were one of the main drivers.
“While the deal is still subject to various approvals, of course, we do not expect there to be any issues blocking the close”.
There is no need for Pfizer/Allergan to utilize a new holding company in a third country to enjoy the tax advantages related to an Irish jurisdiction, even under new rules announced covering this kind of deal by the U.S. Treasury on November 19.
The US has the highest tax rate for businesses in the world, at 35 percent, and is one of the only countries to tax corporate profits wherever they are earned.
Earlier in July, Allergan agreed to sell its generics business to Israel’s Teva Pharmaceutical Industries Ltd. for more than $40 billion.
Pfizer manufactures pneumonia drug Prevnar, erectile dysfunction drug Viagra and nerve pain medication Lyrica.
Advertisement
Burger King made headlines a year ago when it bought Canadian doughnut chain Tim Hortons and moved its address to Canada.
