Pfizer, Allergan to merge in 160-billion-dollar tax inversion deal

Lawmakers trying to fund a fresh round of highway construction with proceeds from revamped global tax rules this year started their detailed talks too late, Mr. Delaney said in an interview Monday, and the whole effort got set aside when the House spent October finding a new speaker.

It’s an example of a so-called corporation inversion, where a USA company hooks up with a foreign corporation to benefit from its address and the lower tax rate that comes with it. This means the profits of the new company would be subject to corporation tax of 12.5% – much lower than the 35% Pfizer pays in the US.

The US Treasury Department last week unveiled new rules to clamp down on inversions, its second attempt to do so since a wave of deals peaked in September 2014. Pfizer is doing the largest inversion deal of all time.

Here are some of the biggest deals, excluding debt, with the year in which they were announced.

The transaction represents more than a 30% premium based on Pfizer’s and Allergan’s unaffected share prices as of October 28, 2015.

Pfizer is known for drugs such as Zoloft, Lipitor and Viagra. Pfizer will have its global operational headquarters in NY and its principal executive offices in Ireland.

When this transaction is completed towards the end of 2016, these companies have both said that the Irish legal domicile of Allergan will be retained.

Both Pfizer and Allergan shares were down 2.1% in early trading in NY following the announcement. To avoid potential restrictions, the transaction was technically structured as smaller Dublin-based Allergan buying Pfizer, although the combined company will be known as Pfizer and continue to be led by Mr Read. “The fact that Pfizer is leaving our country with a tremendous loss of jobs is disgusting”, Trump said in a statement to Business Insider.

The head of the company will be Pfizer Chief Executive Officer Ian Read, while Allergan CEO Brent Saunders will be in a high position, and most likely will take over after a period of time.

The $160-billion stock deal will push the combined companies, to be called Pfizer Plc and based in Ireland, past Switzerland’s Novartis to the top of the drug industry, based on annual sales of about $60 billion.

The Wall Street Journal had reported the companies were on the cusp of a deal, with terms having been hammered out, on Sunday. This is going to help them cut the tax bill from the United States by shifting their headquarters to Ireland.

The companies expect that shares of the combined entity will be listed on the NY Stock Exchange and trade under the “PFE” ticker.

The board will have 15 members, with 11 from Pfizer and four from Allergan.

So far, the shareholder bottom line has suffered some: Reuters points out that Pfizer’s shares dropped 2.6 percent – “making it one of the biggest drags on the S&P”.