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How Treasury's Action Could Kill Pfizer-Allergan Merger

The U.S. Treasury Department has apparently killed the $130 billion merger of Allergan (AGN - Get Report) and Pfizer (PFE - Get Report) with its new directive regarding inversions.

The federal agency on Monday amended its view on the corporate combinations that move domiciles to non-U.S. jurisdictions for tax advantages in a way that would restrict the tax benefits of the Pfizer- Allergan deal.

The merger, announced last October following a prior adjustment by the Treasury department regarding inversions, was structured so Pfizer, the technical target in the deal, would not account for more than 60% of the equity in the combination. The deal was structured to avoid the "inversion" definition but still have a decidedly positive effect on the effective tax rate for the combined companies compared to the weighted average of the two companies pre-merger tax rates.

So long as existing Pfizer shareholders would not own 60% of the new company, the merged entity fell outside the Treasury Department...


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