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Pfizer, Allergan scrap $160 billion deal after U.S. tax rule change

Have you expected that?

U.S. drugmaker Pfizer Inc and Ireland-based Allergan Plc walked away from their $160 billion merger on Wednesday, a major win for President Barack Obama, who has been pushing to curb deals in which companies move overseas to save on taxes.

Pfizer said the decision was driven by new U.S. Treasury rules aimed at curbing such deals, called inversions. The merger would have allowed New York-based Pfizer to cut its tax bill by an estimated $1 billion annually by domiciling in Ireland, where tax rates are lower.

While the new Treasury rules did not name Pfizer and Allergan, one of the provisions targeted a specific feature of their merger - Allergan's history as a major acquirer of other companies.

With the deal behind it, Pfizer said it would decide this year about whether to split off its hundreds of generic medicines into a separate business. It had put off making that decision until 2019 after announcing its deal with Allergan last November.

Allergan said it would move ahead with plans for its $40.5 billion sale of its generic drug business to Israel's Teva Pharmaceutical Industries. It expects the transaction to close by June.

Pfizer will pay Allergan $150 million to reimburse expenses from its deal.