A $160 billion deal announced Monday to merge Pfizer and Allergan and create the world’s biggest drug company renewed the outcry in Washington over “inversions”, in which USA corporations combine with companies overseas to lower their tax bill.
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Pfizer is known for drugs such as Zoloft, Lipitor and Viagra.
U.S. drugs giant Pfizer has sealed a deal to buy Botox-maker Allergan for $160bn (£106bn) in what is the biggest pharmaceuticals deal in history.
The world’s biggest ever “tax inversion” deal also enables the New York-based Pfizer to decamp to Ireland and massively reduce its corporate tax liability.
Unsurprisingly, the USA government is none too pleased with the takeover bid and Pfizer’s decision to move its corporate infrastructure to Ireland, presumably due to the US’ corporate tax rate of 35pc being undercut by Ireland’s 12.5pc rate. While the US Treasury has issued a raft of anti tax inversion legislation, analysts believe that Pfizer will successfully structure the deal to avoid those new regulations.
This deal gives a value of $ 363.63 to each share of Allergan which is around 16% higher than their current price of $ 312.46 as of closing on Friday.
The combined business, which will be named Pfizer, will be legally domiciled in Ireland, but will have its global operational headquarters in NY.
There have been a number of mergers in the healthcare industry since the passage of the Affordable Care Act, which complicated the outlook for healthcare companies’ profits and revenue.
By acquiring Allergan, Pfizer would not only save on its overall tax rate, but it would also be better able to use earnings from its global operations for additional acquisitions or other activities.
Under President Obama officials have made concerted efforts to combat the practice, but no full solution has been found. Clinton aims to change that if she is elected as the next USA president in 2016.
The transaction is contingent in part on the completion of Allergan’s pending divestiture of its generics business to Teva Pharmaceuticals, which is expected to be completed in the first quarter.
Even though this deal is structured in a way that looks like Allergan is purchasing Pfizer, the company’s control will be retained by Pfizer.
The deal calls for the businesses of Pfizer and Allergan to be combined and renamed Pfizer plc, which will be listed on the New York Stock Exchange and trade under the “PFE” ticker.
Sen. Charles Schumer, D-N.Y., a member of the Senate Finance Committee, called Pfizer’s move “truly disturbing”, given how the company has benefited from federally funded research and infrastructure.
Pfizer said it expects to buy back about $5 billion in shares in the first half of next year under an accelerated program.
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The deal will enable the combined company to pour around $9 billion a year into research on new treatments, Read said in an interview. Pfizer shareholders are expected to hold 56 percent of the merged company, with Allergan shareholders the remaining 44 percent.
