Shares of Pfizer surged over 8 per cent in trade on Tuesday after the US-listed Pfizer Inc and Botox manufacturer Allergan agreed to merge in a record 0 billion deal, creating a drug making behemoth, in the biggest buyout in the healthcare sector.
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When the deal is done, the combined company will rename itself Pfizer and it will be considered an Irish company because Allergan is based in Ireland.
British journalist and author Simon Jenkins has said that Pfizer’s decision to move its headquarters to Ireland, as part of its $160bn merger deal with Allergan, is a text book example of the kind of corporate tax avoidance which should be made “illegal”.
Pfizer and Allergan said their deal would lead to an effective tax rate for the new company of about 17 to 18 percent.
“U.S.-based corporations have to pay tax overseas to the country in which they’re doing business and back to the United States when they bring the money back”, said Kyle Pomerleau, the director of federal projects at the Tax Foundation.
US President Barack Obama has called inversions unpatriotic and has tried to crack down on the practice.
Those changes weren’t enough to keep Pfizer and Allergan from merging in the largest inversion-type deal so far by a USA company. Pfizer stock owners will hold an approximately 56 percent stake in the combined company, while Allergan shareholders will own the remaining 44 percent. In this case, Dublin-based Allergan is buying New York-based Pfizer, which is 11 times larger.
Pfizer chief executive officer Ian Read will head the new company, with Allergan CEO Brent Saunders in a high position, sources said. Pfizer will have its global operational headquarters in NY and its principal executive offices in Ireland.
The combined company will be known as Pfizer Plc, whose value will soar above that of its rivals.
The transaction, which is subject to regulatory approvals in the USA and Europe, is expected to be completed in the second half of 2016.
But some Democrats criticized the deal, which in effect turns one of America’s largest corporations into a foreign company.
Democratic presidential frontrunner Hillary Clinton has blasted the proposed merger between two huge pharmaceutical companies. The rules bar certain techniques that companies use to lower their tax bills and tighten ownership requirements.
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Allergan investors will receive 11.3 shares of the new company for each Allergan share for a total, now valued at $505.77 per share, more than a 30 per cent premium prior to news reports of the tie-up talks.
