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Why is Allergan (AGN) Stock Plummeting Today?

On Tuesday, shares of healthcare company Allergan Plc AGN are plummeting, down over 16% in morning trading after news that the Treasury Department’s new regulations to curtail corporate tax inversions threaten the company’s planned $160 billion merger with Pfizer PFE.

Allergan’s merger with Pfizer, which was agreed to last year, would be the biggest tax inversion deal ever. Under these kinds of deals, when a United States-based company can merges with a foreign company, they can move its headquarters  abroad in order to get a reduced tax rate.

According to The Wall Street Journal, “The new rules, the government’s third wave of administrative action against inversions, will make it harder for companies to move their tax addresses out of the U.S. and then shift profits to low-tax countries using a maneuver known as earnings stripping.”

Despite these new rules, either Allergan or Pfizer would be able to call off the deal if an unfavorable change in U.S. law necessitates that the newly combined company be treated as a U.S. domestic entity for federal income tax purposes.

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PFIZER INC (PFE): Free Stock Analysis Report
 
ALLERGAN PLC (AGN): Free Stock Analysis Report
 
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