Allergan deal will go ahead, says Pfizer chief
Pfizer’s chief executive Ian Read says his company’s $160 billion takeover of Allergan will not be blocked by US politicians.
The deal was announced in November last year, and will see Pfizer shift its tax base to Ireland, allowing it to cut billions from its tax liability.
The biggest loser from this deal will be the US Treasury, and politicians from all parties in the US have called for it to be blocked.
But while many investors fear the US government will intervene, Ian Read, Pfizer chief executive, remains bullish.
“Under current law, I do not believe there is any reason why the deal will not close – full stop,” he told the Financial Times (FT).
Still fresh in many minds, however, is the US Treasury’s rapid rule change in 2014, which closed off a number of tax loopholes.
This scuppered a very similar deal, AbbVie’s $32 billion takeover of Dublin-based Shire later that year, and many anticipate further action from the US Treasury.
Several presidential candidates, including Hillary Clinton and Donald Trump, have criticised the Pfizer deal, although neither is in a position to act. However President Obama, now coming to the end of his term in office, and could OK a further tightening of the Treasury rules.
Obama has spoken out strongly against tax inversions by US companies in the past, calling them ‘unpatriotic’.
Further moves by the President could be popular with voters, though they would be likely to face opposition from Republican-controlled Congress.
Mr Read says he is determined to press on and complete the transaction in the second half of 2016.
“I think it’s good to see a robust political process, and for the different ideas to get full scrutiny, but it has no implications for the deal,” he told the FT. “We are operating under today’s laws, written by US Congress.”
The comments came as Pfizer announced its full-year results for 2015, and earnings forecast for 2016.
Both sets of figures disappointed the markets.
Pfizer blamed a stronger dollar, an economic crisis in Venezuela and slower sales of its blockbuster pneumonia vaccine Prevnar 13.
The firm expects revenues to be around $50 billion in 2016, excluding sales from recently-acquired biosimilars specialist Hospira, the same as last year, and about $2.5 billion lower than analysts had been expecting.
Pfizer said it expected earnings per share to be $2.25 for 2016, well below the $2.38 that analysts were typically expecting.
Mr Read and his counterpart at Allergan Brent Saunders (and his soon-to-be deputy at Pfizer) still need to convince investors the merger will add value. Pfizer has already adopted Allergan’s ‘growth pharma’ mantra, but many analysts see the two parts as ill-fitting culturally.
Integral to its strategy is the potential for further deal making: the firm will decide in 2018 whether to break the enlarged Pfizer-Allergan into two or three smaller companies.
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