Pfizer Merges With Allergan In $160B Tax Inversion Deal

The transaction requires shareholder and regulatory approval and could face stiff opposition from US lawmakers. Pfizer and Allergan’s deal appears structured to avoid the tax inversion rules.

Clinton said it will leave “U.S. taxpayers holding the bag”, while Sanders said it will be a “disaster” for Americans already paying high prescription drug costs.

The combined business, which will be named Pfizer, will be legally domiciled in Ireland, but will have its global operational headquarters in NY.

According to Pfizer, the two companies will merge under Allergan PLC, which will then be renamed Pfizer PLC. The USA has a 35 percent corporate tax rate, the highest of any developed economy.

Allergan, based in Dublin, is in the process of selling its generics unit to Israel’s Teva Pharmaceuticals Industries Ltd., the world’s top generic drug maker.

Pfizer, maker of Viagra and Lipitor, attempted a similar merger with U.K.-based AstraZeneca a year ago, but Pfizer’s proposal ultimately was rejected by the British company, Slate reports. White House Press Secretary Josh Earnest said Monday that the Treasury Department has tried to crack down on inversions, and managed to make them somewhat more hard, but said Congress needs to act to make more sweeping changes. The rules bar certain techniques that companies use to lower their tax bills and tighten ownership requirements.

The front-runner for the Democratic presidential nomination in the November 2016 election said she will propose steps to prevent more inversions, but she did not provide details.

Billionaire investor Carl Icahn recently announced that he was setting up a US$150 million super PAC bent on revising United States corporate tax law and ending the practice, ratcheting up political pressure even more.

Pfizer (NYSE:PFE) executives who back the idea of inversions said that there is a need to move overseas in order to sustain a strong competition against worldwide rivals because they are being restricted by the U.S. tax code. The Pfizer-Allergan deal drew such criticism amid the ongoing debate about higher drug prices.

The deal might have been described as a mega-merger in the pharma industry, but some of the leading analysts and pharma company executives in India told Business Today it doesn’t hold much ground for Indian pharma companies. In pre-market trade on Wall Street, shares in Pfizer dropped 2.5 percent to $31.36 and Allergan fell 1.5 percent to $307.76.

Pfizer boss Ian Read will be chief executive and chairman of the merged company, with Allergan boss Brent Saunders becoming president and chief operating officer.

President Barack Obama included provisions in his 2015 budget request to limit inversions, and has called on Congress to act.

The deal represents a premium of over 30 per cent based on the price of the companies’ unaffected shares as of Oct 28, Pfizer and Allergan said in a joint statement.

2014: Medtronic buys Covidien for $49.66 billion (completed).

On a conference call with analysts, Pfizer said the merger would give it enhanced access to its tens of billions of dollars parked overseas over time and allow for more share buybacks and dividend payments.

Pfizer shareholders would have control of 56% of the combined company.

Will the merger benefit consumers? .

Speaking in Brussels yesterday, Finance Minister Michael Noonan said Ireland was “not pushing for inversions”, the name given to the financial engineering engaged in by multinationals to reduce their tax bill. “It definitely increases the reputational risks to the industry”. In the merger announcement, the companies said Pfizer would make a decision about separating the businesses by no later than 2018. “It would be premature to discuss any plans for our facilities”, said spokeswoman Neha Wadhwa, adding that “there is not much overlap between the two companies”.