Chiang wrote, “At the end of the day, we think Allergan shareholders may be left wondering what the rationale of such a deal is, especially given the fact that its shares are now trading at ~$303, post the announcement of one of the largest pharma deals ever”.
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Under the definitive merger agreement, which has won unanimous support from both boards of directors, the companies will combine under Allergan, which will be renamed Pfizer, to create the world’s leading drugmaker by sales.
According to a source close to the deal, Pfizer wanted to beat implementation of new US Treasury measures which will make it more hard for U.S. companies to escape taxes via a merger which moves their tax home overseas, a mechanism called a “tax inversion”. The White House declined to comment on Pfizer’s acquisition, but a spokesman told reporters in a briefing that Congress should take action to prevent inversions. In October 2014, Chicago-based AbbVie and Dublin-based Shire Pharmaceuticals called off a $54 billion inversion deal after the Treasury issued new rules.
The deal enhances offerings from both Pfizer’s faster-growing branded products business, with additions like Botox, and its older established products unit.
Perhaps anticipating the deal would draw fire, Read sent a letter on Monday to senior senators. Its global operating headquarters would be in NY, and its principal executive offices would be in Ireland.
Allergan has about 2,100 employees in the Los Angeles-area city of Irvine, where it was formerly headquartered, and an additional 300 in nearby Corona out of a global workforce totaling 30,000. As an Irish-domiciled company, it will have less costly access to those funds.
The tax aspect of the deal has been seen as critical.
Under the terms of the allshare deal, Pfizer would essentially pay $363.63 for each Allergan share, representing a more than 30 per cent premium to Allergan’s share price in late October before news emerged that they were in talks. She added that she would fight to crack down on inversions if elected president.
However, some recent research out of Northwestern’s Kellogg School of Management suggests that might be off-and that, weirdly enough, inversions might actually increase American tax collections by allowing companies to bring money they were previously hoarding overseas back to their US operations and hand it out to shareholders.
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“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 United States, while also enabling our pursuit of business development opportunities on a more competitive footing within our industry”, Pfizer chief executive Ian Read said in a statement. That represents a premium of more than 30 per cent. “It’s basically a tax inversion strategy, and certainly the benefits won’t be passed on to consumers”, Ando said. “Now Pfizer is trying to reduce its tax bill even further”, Clinton said in a statement.
