Following a decision by US Treasury to change tax laws to prevent inversion deals, US drug company, Pfizer has abandoned its merger deal with Ireland’s Allergen.
Drugmaker Pfizer Terminates Merger Deal With Ireland’s Allergan
Inversion deals entail a US firm merging with a company in a country where the taxes are considerably lower.
The deal between Pfizer and Allergan was valued at $160 billion and would have been one of the largest attempts at inverting US tax laws.
The merger would have also been the biggest in the history of pharmaceutical deals.
In a statement, Pfizer said the move to terminate the deal was due to actions by the US Treasury.
Pfizer CEO and Chairman Ian Read said, “Pfizer was coming into this transaction from a point of strength and saw the potential merger as a way to accelerate existing strategies.”
He further said that the company could consider splitting part of the company.
“We are looking to make a decision about whether to potentially split part of our established business by the end of 2016. This decision would be consistent with our initial timeframe before we announced the possible merger with Allergen.
Pfizer said it would reimburse Allergan, the Botox-maker a sum of $1500m for the expenses arising out of the transaction.
Under the merger deal, Pfizer had been looking to move its headquarters to Dublin, a move that would have seen the company pay lower taxes than in the US.
In the Republic of Ireland, corporations pay a tax of 12.5% while the rate stands at 35% in the US.
Earlier this week, President Barack Obama spoke about the inversion trend among companies. He said, ‘These firms reap all the rewards of being an American firm and fail to fulfill their responsibility to pay their taxes.”
Even then, Analysts have pointed out that Pfizer needed to undertake acquisitions in order to expand its revenue and grow its business.