Pfizer is negotiating a price of $370 to $380 for each Allergan share, a person familiar with the discussions said, asking not to be identified because the talks are confidential.
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Press reports indicate that talks between Pfizer (PFE – Get Report) and Allergan (AGN – Get Report) are heating up and that a deal is nearing, but simultaneously the USA government’s rhetoric around the type of “inversion” deal the two pharmaceutical giants are discussing is getting ratcheted up as well. Management usually stays in the United States.
With a major inversion deal in the works between USA drug maker Pfizer Inc and smaller Irish competitor Allergan Plc, Treasury said in the letter, “Later this week, we intend to issue additional targeted guidance to deter and reduce further the economic benefits of corporate inversions”.
Details were not spelled out in the letter, which was addressed to four lawmakers, comprising U.S. Senators Ron Wyden and Orrin Hatch and Representatives Kevin Brady and Sander Levin.
Douglas Poms, senior counsel in the Treasury’s office of the global tax counsel, said on November 4 that the agency continues to consider earnings stripping regulations. Analysts at both Credit Suisse and JP Morgan were constructive on a potential transaction that would combine Pfizer’s $200-billion plus valuation and Allergan’s almost $125 billion valuation.
“The fact that American companies, including Pfizer, continue to pursue inversions makes clear that additional steps are needed to stop this trend”, Levin said.
President Barack Obama has been outspoken against inversions, and the Pfizer deal has drawn strong criticisms in a few quarters.
Lew first took action to undercut the tax benefits of inversions in September 2014, announcing several specific rules meant to prevent companies from moving their headquarters overseas for tax purposes and limiting the tax breaks they could reap if they were successful in moving out of the country.
For months tax experts have speculated about what could come next from Treasury.
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He expects the rules to address earnings stripping, a maneuver that inverted companies use to effectively shift earnings to lower-tax countries and reduce the amount of income taxed at the US rate of 35 percent, the highest in the industrial world.
