The complex deal, the biggest ever in the healthcare sector, will allow Pfizer to shift its legal base to Ireland in a so-called “inversion” that would reduce its tax rate.
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Pfizer also disappointed some investors by delaying by two years a decision on whether to sell off its division consisting of products facing generic competition. Pfizer’s effective tax rate past year was 25.5 percent, a regulatory filing shows.
Trump wants to bring down the corporate tax rate to 15% from the current 35% and make corporations pay a one-time 10% tax on their foreign profits to bring them back into the U.S. In the last GOP presidential debate on Fox News, Trump boasted that he has been praised for his 10% stance.
Treasury wisely made its new rules on inversions retroactive to September of 2014 to cover the Pfizer-Allergan plot and perhaps discourage the purchase.
The deal comes some 18 months after the failure of Read’s initial attempt at an inversion, a $118 billion bid to acquire Britain-based AstraZeneca Plc that ran into staunch opposition from that company’s management and United Kingdom politicians.
“The only thing I’d really say I’m disappointed about is Pfizer’s postponing their break up”, said Gabelli Funds portfolio manager Jeff Jonas. “Shire can only have become a more attractive takeover target, post the 20% fall in its share price following the Group’s announcement of its intention to pursue US Baxalta Inc”.
But some Democrats criticized the deal, which in effect turns one of America’s largest corporations into a foreign company.
“The Pfizer-Allergan merger would be a disaster for American consumers who already pay the highest prices in the world for prescription drugs”. In recent years billions of dollars have been lost by the government in tax revenue from similar inversions.
The two leading Democratic contenders – Sen.
Under the terms of the deal, Allergan shareholders would receive 11.3 shares of Pfizer for each share of Allergan they hold.
Pfizer shareholders will receive one share for each of their Pfizer shares.
Pfizer shareholders would have control of 56% of the combined company. Pfizer plc will have its global operational headquarters in NY and its principal executive offices in Ireland.
President Barack Obama included provisions in his 2015 budget request to limit inversions, and has called on Congress to act.
Clinton has also said she would pursue tax reform, and said she will unveil details about ways to manage corporate tax inversions soon.
Bipartisan efforts to overhaul the corporate tax code have stalled and legislation is unlikely until after next year’s presidential election.
“This is has been what people are more anxious about”.
Democratic congressman Sandy Levin, a long-time critic of inversions, said it highlights the need for Republicans to join Democrats in addressing the issue. The latest rules would not impede the Pfizer-Allergan transaction, analysts said.
Ian Read, CEO of Pfizer will be chairman and CEO of the new company, while Allergan CEO Brent Saunders will be the president and chief operating officer, overseeing sales, manufacturing and strategy, the companies said on Monday. Merger and acquisition activity worldwide surpassed $4 trillion as of Thursday, for only the second time since Thomson Reuters began keeping records in 1980.
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It will also open up their products such as Viagra and Botox to new markets.
