Pfizer to end $160bn Allergan merger after US tax changes

Pfizer has decided to end its $160 billion merger with Allergan after the US government tightened rules around tax inversions, according to press reports.

Following widespread press reports, Pfizer confirmed that the two companies had agreed to terminate the deal because of the tax law changes.

Bloomberg reported that Pfizer will need to pay a $400 million fee for expenses relating to the deal, citing an anonymous source.

A US government announcement outlining a clampdown on tax inversions did not mention the Pfizer deal specifically, but President Obama described said in a briefing yesterday that such deals are “insidious”, allowing companies to “flee the country just to get out of paying their taxes.”

Allergan is run from New Jersey but is domiciled in Ireland which has a lower tax rate than the US, making a tax inversion deal where the merged firm would pay a much lower rate.

But a change in tax rules announced by the US Department of the Treasury yesterday, looks to have killed the deal that would have created the world’s largest pharma company.

A previous US Treasury crackdown on tax inversions ended AbbVie’s attempt to buy Shire in 2014.  However the new rules go much further,  and prevent foreign-domiciled companies from attempting tax inversions after buying US companies and increasing their size.

This strategy allowed Pfizer and Allergan to comply with rules requiring the foreign company to be at least a quarter of the size of the US firm.

Other reports suggested the companies may formally announce the termination of the deal this morning. Yesterday the companies said they were reviewing the changes.

Related stories:

US treasury crackdown could end $160bn Pfizer-Allergan merger

US regulator asks for more info on Pfizer/Allergan merger

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