More than 50 similar deals have been done over three decades by well-known companies such as Medtronic, Fruit of the Loom and Ingersoll-Rand.
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It is also increasing the election-year backlash from US politicians who have been blasting drugmakers recently over medicine prices that can exceed $100,000 a year.
The maneuver is a variation on the conventional inversion, in which a USA firm buys a smaller foreign competitor in a lower-tax nation and shifts the merged company’s headquarters there. President Barack Obama has called inversions unpatriotic and is pushing to crack down on deals, with limited success.
The merger was driven by tax considerations, with Pfizer carrying out what is known in the US business world as a tax inversion deal.
Both companies have a good presence in India.
Hillary Clinton, the frontrunner for the Democratic presidential nomination, is leading the attack on the drug maker’s attempt to cut its tax bill by moving its headquarters to Dublin. Allergan produces the wrinkle treatment Botox and Restasis for dry eyes, and also has a superior pipeline of medicines in development. They would join Pfizer’s extensive portfolio of vaccines and drugs for cancer, pain, erectile dysfunction, and other conditions.
Pfizer chairman and CEO Ian Read will run the combined company. Treasury said it had no comment Monday. The combined company would have annual sales of about $64 billion.
The biggest deal in the history of pharmaceutical is here and Pfizer Inc. will become Pfizer plc. Pfizer confirmed the talks. When the acquisition is complete, Allergan shareholders will receive a total of 11.3 shares of the combined company per owned share while Pfizer shareholders will received 1 share of the combined company per owned share.
The merged business will be called Pfizer Plc.
Speaking to reporters in Brussels yesterday, Mr Noonan, noting that both companies have large operations here, said the mega deal would not put Ireland’s tax regime into a bad light. As of Friday’s close, Pfizer had a market cap of $199 billion; Allergan was at $123 billion.
Investors didn’t much like the deal.
Shares of Pfizer were down 3.3 percent, while Allergan fell 2.4 percent.
Pfizer has an estimated $US74 billion in cash stored offshore, and the Financial Times estimates it could be in line for a one off windfall of up to $US21 billion ($29 billion) through lower taxes. The Association for National Advertisers (ANA) expressed its concern for the ban to take hold, saying it would “set the USA back decades in terms of the information available to consumers and patients”. Allergan itself is the product of an inversion.
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CNN reported that the new Treasury rules alone were not expected to scuttle the deal. “While we understand the rationale for an “inversion” deal for Pfizer (and its eventual splitting into two companies), we think the rationale for Allergan is less compelling”. Pfizer shareholders will receive one share for each of their shares in that company.
