Tokyo stocks were slightly lower as trading resumed after a Monday holiday.
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As per the definitive merger agreement that has been approved by the Boards of the two companies, Pfizer will combine with Allergan in a stock transaction now valued at $363.63 per Allergan share, for a total enterprise value of approximately $160 billion, Pfizer said.
Republican Chair of the Senate finance committee Orrin Hatch expressed, “This (deal) only further underscores the arcane, anti-competitive nature of the United States tax code”.
Pfizer and Allergan said their deal would lead to an effective tax rate for the new company of about 17 to 18 percent.
Investors don’t particularly like the deal as shares of both companies fell on Monday – apparently the cost savings aren’t as large as they hoped.
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.
Despite attempts by Congress and the Treasury Department to thwart the practice, about 50 USA companies have inverted in the past decade, and more are considering it, according to the nonpartisan Congressional Research Service.
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.
If the deal between Allergan and Pfizer goes through, the combined company is considering a long-awaited plan to split Pfizer’s new therapies business from its established product business.
Allergan Chief Executive Brent Saunders will become president and chief operating officer of Pfizer Plc. In pre-market trade on Wall Street, shares in Pfizer dropped 2.5 percent to $31.36 and Allergan fell 1.5 percent to $307.76. The latest rules would not impede the Pfizer-Allergan transaction, analysts said.
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“Pfizer built their business on the back of our research and development tax incentives, our federally supported medical research, our skilled workforce, and our infrastructure”, said Democratic Representative Rosa DeLauro in a statement. It could end up being the world’s second-largest merger following British telecom company Vodafone’s purchase of Germany’s Mannesmann for $172 billion including debt, in 1999.
