U.S. plans new moves to discourage tax-dodging mergers

But a few companies, including pharmaceutical giant Pfizer, are considering new inversions that could cut their firms’ effective tax rates.

The US Treasury Department will clamp down further this week on corporate income tax-avoiding “inversion” deals by United States companies with foreign rivals, according to a letter seen by Reuters.

Last year, Pfizer attempted a $118-billion takeover of UK-based AstraZeneca, only withdrawing in the face of staunch opposition from the AZ’ management, British politicians and media. “Congress should get off the sidelines and take action to change the law to stop these tax-motivated inversions”.

“The fact that American companies, including Pfizer, continue to pursue inversions makes clear that additional steps are needed to stop this trend”, Sander Levin, the ranking member of the House’s tax-writing committee, said in a statement Wednesday.

Pfizer and Allergan are in the final stages of discussions to merge, sources told CNBC on Thursday. “What has to happen is the USA has to create a competitive environment for companies”. Shares of Allergan Plc, the Ireland-based drugmaker in talks to be taken over by New York-based Pfizer Inc., dropped 4.4 percent in extended trading on news of the Treasury’s plans.

Bloomberg News first reported on the price that Pfizer and Allergan were discussing.

In his letter, Lew said the Treasury can not stop inversions with the limited authority it has and urged Congress to remove the incentives in the tax laws that encourage such mergers. Meanwhile, Susquehana’s Andrew Finkelstein said he was not surprised that the Treasury will announce more measures reducing the benefits of inversions, noting that last fall it proposed rules aimed at limiting inverted companies’ use of cash and threatened measures to combat earnings stripping on a retroactive basis.

WRONG TIME TO SELL?: Earlier this month, Bernstein’s Aaron Gal said it looked “like the wrong time to sell” for Allergan, given its strong execution and solid product revenue growth, along with the weakness in drug stocks. In the space stand a business with a volume of 150 billion dollars, BelTA learned from Verhandlungskreisen.Pfizer negotiating a price 370-380 dollars per Allergan shares.