Last week, the US Treasury Department and the Internal Revenue Service announced new rules meant to further clamp down on the benefits of such mergers.
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This process, known as corporate inversion, is a common yet controversial process that has seen USA companies lessen their tax burden by shifting their corporate infrastructure to Ireland.
After Martin Shkreli’s pharmaceutical company raised the price of a drug used to treat a deadly infection by 5000%, a compounding pharmacy is now offering an alternative at a fraction of the cost.
The acquisition was structured as Allergan buying Pfizer to avoid certain constraints.
Botox maker Allergan is based in Ireland but runs much of its operations out of New Jersey.
The deal would bring together the corporations behind such well-known pharmaceuticals as Viagra and Botox, creating the biggest drug company in the world. It would have about 110,000 employees worldwide.
The transaction represents 30 percent premium based on Pfizer’s and Allergan’s share prices as of October 28, 2015. The latest rules would not impede the Pfizer-Allergan transaction, analysts said. The companies’ boards of directors accepted the offer Sunday.
Although the rebranding will be called Pfizer Plc, legally, the company’s combination will be under Allergan Plc.
Allergan shareholders will receive 11.3 shares of the combined company for each of their Allergan shares, and Pfizer investors will receive one share of the combined company for each of their Pfizer shares. Pfizer shareholders would control of 56 percent of the combined company.
Allergan’s parent firm will be the parent of the combined new business.
CEO of Pfizer, Ian Read, is going to hold the position for the combined entity as well while the CEO of Allergan, Brent Saunders is going to become COO and President. The transaction is expected to close in the first half of 2016.
Last year, Pfizer’s attempted takeover of AstraZeneca failed, but was at least in part motivated by tax. By comparison, Allergan reported a tax rate of just 4.8 percent for 2014 and is expected to have a tax rate this year of about 15 percent.
Democrats heaped the most criticism on the New York-based drug maker, with Hillary Clinton accusing Pfizer of using legal loopholes to avoid its “fair share” of taxes in a deal that she said “will leave us taxpayers holding the bag”.
The proposed $160 billion merger may “generate a level of heat” that the Irish authorities wouldn’t have been looking for, Coveney told RTE Radio’s Morning Ireland. “We are not pushing for inversion, the IDA never promotes inversion – it’s a decision by the two companies”.
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The deal could also be “a precursor to Pfizer’s eventually being split in two”, one dedicated to brand-name treatments and the other focused on drugs nearing the ends of their patent lives, according to The New York Times.
