Although New York-based Pfizer is the larger company, the deal is structured so that Allergan technically is the purchaser – a twist on the tax-avoidance tactic known as inversion. This merger, experts suggest, will help Pfizer escape the USA tax structure which now imposes roughly 25 percent corporate tax, In its new structure, Pfizer’s taxes may be cut to about 12% or even below that.
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And the merger is actually good for the US, Read contends-despite the loss in tax dollars and a $2 billion cost-cutting target that means layoffs are on the way.
Similarly, Pfizer (NYSE:PFE) planned acquisition of Allergan is being challenged by the familiar political situation as Barack Obama denounced such inversions as unpatriotic. Pfizer stock owners will hold an approximately 56 per cent stake in the combined company, while Allergan shareholders will own the remaining 44 per cent.
“The combination of Allergan and Pfizer is a highly strategic, value-enhancing transaction that brings together the two bio-pharma powerhouses to change lives for the better”, Allergan chief executive officer Brent Saunders said.
The companies estimated the merger would increase earnings per share 10%, excluding special items, in 2019 and add by a high-teens percentage rate in 2020.
Allergan shareholders will receive 11.3 shares of the combined company for each of their Allergen shares, and Pfizer stockholders will receive one share of the combined company for each of their Pfizer shares.
Clinton accused Pfizer of using legal loopholes to avoid its “fair share” of taxes in a deal that she said “will leave USA taxpayers holding the bag”.
The biggest deal in the history of pharmaceutical is here and Pfizer Inc. will become Pfizer plc.
Pfizer boss Ian Read said the money Pfizer would save from the deal would give it the strength to research, discover and deliver more medicines and therapies to people around the globe. It will allow New York-based Pfizer to shift base to Ireland for tax purposes. U.S. efforts to suppress the technique have so far been futile.
The companies’ boards of directors reportedly approved the deal Sunday, according to the Wall Street Journal. It said, “We will maintain our global operational headquarters in NY City”. He and other politicians said Congress needs to reform tax laws, such as by lowering corporate rates, to prevent more inversions.
Pfizer said is expects the merger would see $2bn in savings in the first three years of combined operation.
Allergan’s shares were down 1.7 percent in premarket trading, while Pfizer’s were down 2.1 percent. It will not only create the biggest drug maker in the world but will also move a top American corporation out of the country.
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“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.
