Provided the latest deal is approved, Viagra manufacturer Pfizer could shift its tax base to Ireland, where Allergan is headquartered.
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Several US drugmakers have performed inversions in recent years.
President Obama has said that he would support a 28% corporate tax rate, down 7 percentage points from the current rate as well as a 19% tax on foreign income instead of the full 35% tax rate.
The US Treasury Department has issued a letter on so-called tax inversion deals, saying that it is reviewing means of stopping them taking place.
If these figures are to be believed, then Ireland’s coffers are about to be significantly boosted, considering last year’s entire corporate tax revenues were €4.6bn.
Hillary Clinton, the front-runner for the Democratic presidential nomination, blasted Pfizer for using legal loopholes to avoid paying its “fair share” of United States income taxes in a deal she said “will leave USA taxpayers holding the bag”. If the deal goes through as expected, it will create the largest pharmaceutical company in the world, with a market capitalisation of around $321 billion. Also, the merger is not expected to meet stiff resistance from the regulator tasked to review the deal, the Federal Trade Commission (FTC), according to NYT’s sources.
After the deal is finalised, former Pfizer shareholders will own about 56 percent of the combined company.
Pfizer, which makes the cholesterol fighter Lipitor, will keep its global operational headquarters in NY, but after its. While Noonan said Allergan and Pfizer were plainly merging for “tax advantages’, the government does not have a problem with the deal as both companies have “substantial” operations in Ireland, he said”.
“One business would focus on newer products, such as Pfizer’s breast-cancer drug Ibrance and Allergan’s blockbuster Botox, and have sales the companies project will grow in the double digits”, said the newspaper.
The deal values Allergan shares at $363.63 each, about 16 percent more than their closing price of $312.46 on Friday.
In this case, the deal is structured so that Allergan is technically the purchaser, even though Pfizer is the larger company.
Mr Read and Brent Saunders, the Allergan boss who will become chief operating officer of the combined group, said the question of tax and access to cash was just one of the factors driving the acquisition.
More than 50 similar deals have been done over three decades by well-known companies such as Medtronic Plc, Fruit of the Loom and Ingersoll-Rand Plc. Pfizer shares closed 2.64 percent lower at $31.33 and the Allergan shares closed down 3.44 percent at $301.72. “We can not delay in cracking down on inversions that erode our tax base”, said the ex-US secretary of state and former NY senator in a statement.
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Sen. Charles Schumer, D-N.Y., a member of the Senate Finance Committee, called Pfizer’s move “truly disturbing”, given how the company has benefited from federally funded research and infrastructure.
