Pfizer Inc on Monday said it would buy Botox maker Allergan Plc in a record-breaking deal worth $160 billion to cut its USA tax bill by moving its headquarters to Ireland.
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Sanders said the Pfizer-Allergan deal would be “disaster” and called on the Obama administration to stop the merger, which would create the largest drug-maker in the world.
In Dublin, Greencore chief executive Patrick Coveney said the Pfizer plan, which would see it move its tax address to Ireland from the United States by buying and merging into Dublin-based Allergan, is “a deal that is going to be very emotive”.
The acquisition, which would create the world’s largest drugmaker and shift Pfizer’s headquarters to Ireland, would also be the biggest-ever instance of a US company re-incorporating overseas to lower its taxes. This means the profits of the new company would be subject to corporation tax of 12.5% – much lower than the 35% Pfizer pays in the US.
Ian Read, the CEO of Pfizer (NYSE:PFE), said in a statement that this merger with Allergan, Pfizer (NYSE:PFE) will have acquired more financial flexibility which would ensure it locating and developing new drugs for patients for better recovery, and at the same time, it would be able to provide huge returns to shareholders.
Allergan investors will receive 11.3 shares of the new company for each Allergan share for a total now valued at $363.63 per share, more than a 30 percent premium prior to news reports of the tie-up talks.
More than 50 similar deals, called inversions, have been done over three decades by well-known companies such as Medtronic, Fruit of the Loom and Ingersoll Rand.
Clinton has also said she would pursue tax reform, and said she will unveil details about ways to manage corporate tax inversions soon.
When this transaction is completed towards the end of 2016, these companies have both said that the Irish legal domicile of Allergan will be retained.
Despite attempts by Congress and the Treasury Department to thwart the practice, about 50 US companies have inverted in the past decade, and more are considering it, according to the nonpartisan Congressional Research Service.
Democratic presidential candidates Hillary Clinton and Bernie Sanders have both voiced strong objections.
The combined company is expected to generate annual operating cash flow in excess of $25 billion, beginning in 2018 with broadened innovative pipeline of more than 100 combined mid-to-late stage programmes in development.
Jamie Court, president of advocacy group Consumer Watchdog, said the consolidation of two pharmaceutical giants could lead to higher drug prices because of decreased competition.
So far, the shareholder bottom line has suffered some: Reuters points out that Pfizer’s shares dropped 2.6 percent – “making it one of the biggest drags on the S&P”.
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Stockholders of Pfizer can choose to get cash or a single share of their combined company for every share of theirs.
