In the wake of tax law changes announced by the US Treasury this week, pharmaceutical companies Pfizer Inc. and Allergan are calling off a $160 billion merger.
Advertisement
The deal – which would have seen the New York-based Pfizer move its tax base to Ireland – would have been the largest “tax inversion” deal in history. Allergan shares were slightly lower in premarket trading Wednesday following the announcement, while Pfizer shares were slightly higher.
Pfizer has new products coming and plenty of money that it could put to work with acquisitions, though not on the scale of Allergan, said Les Funtleyder, healthcare portfolio manager at E Squared Asset Management in NY, which holds Pfizer shares. He said until then, creative accountants will find new ways to avoid paying USA taxes.
This happened after the Treasury Department unveiled new rules that would have eliminated the tax advantages of the deal.
Analysts said the decision could now be moved to late 2017 or 2018 as the deal with Allergan collapsed. Investors often speculate which companies could be targeted in such deals, and any merger for that matter, to look for quick gains.
The rules were aimed at “serial inverters” – foreign companies that have expanded in recent years through multiple inversion transactions.
Per the terms of their contract, Pfizer is expected to pay Allergan a 0 million fee to break off their arrangement.
“While the Treasury Department actions will make it more hard and less lucrative for companies to exploit this particular corporate inversions loophole, only Congress can close it for good”, Obama said.
United States presidential candidates Republican Donald Trump and Democrats Hillary Clinton and Bernie Sanders have also criticised inversion deals during their campaigns. This has resulted in a “wave” of inversions for the federal government to tackle.
Correction: An earlier version of this story misstated the value of the planned deal. Pfizer is now based in NY.
That includes the Pfizer takeover and a proposed $16.5bn merger of Johnson Controls, a U.S. maker of vehicle batteries and ventilation equipment with industrial giant Tyco International – which like Allergan is officially domiciled in Ireland.
Advertisement
Pfizer had previously attempted to purchase AstraZeneca in 2014 in another attempt to relocate overseas.
