Pfizer, Allergan call off $160B merger
Largest health-care deal halted after U.S. moves against tax inversion
Pfizer Inc. and Allergan Plc have terminated their US$160-billion merger in an abrupt end to the largest-ever health-care deal after the U.S. government cracked down on corporate tax inversions.
The U.S. Treasury Department’s proposed new rules to deter companies from using acquisitions to shift their tax addresses overseas drove the decision, the companies said Wednesday in a statement. New York-based Pfizer will pay Allergan US$150 million in reimbursement for expenses associated with the failed transaction.
Both companies are left looking for their next move — another deal, in Allergan’s case.
“While this was not Plan A, we were prepared for this,” Allergan chief executive officer Brent Saunders said in an interview on Bloomberg TV Wednesday. “We’re going to go and look to find assets that complement and increase our growth profile.”
Pfizer said it will decide whether to pursue a split of the company by no later than the end of this year.
“The fact that the company is talking about the original split-up decision timeline of late 2016 almost seems to suggest they have given up on inversion,” Timothy Anderson, an analyst at Sanford C. Bernstein & Co., said of Pfizer’s decision.
Asked about whether he might be interested in buying Valeant Pharmaceuticals International Inc.’s eye-care unit, Bausch & Lomb, Saunders demurred, though did call it a premier asset. He declined to comment directly on what companies he might look at next.
The termination represents a victory for U.S. President Barack Obama, whose administration proposed tougher-than-expected new rules aimed at making inversions like the Pfizer-Allergan deal harder to achieve. In an inversion, a U.S. company shifts its tax address overseas, often through a merger.
Saunders said it wouldn’t have been in the best interests of his shareholders or Pfizer’s to fight the new rules.
“It would have been a long, protracted, expensive fight,” he said.
With the U.S. Treasury rule, tax inversions — performed by U.S. companies seeking to escape the country’s 35 per cent corporate tax rate — appear to be largely over.
Allergan, which is run from New Jersey but has a legal domicile in Dublin, last year agreed to merge with Pfizer in a deal that would have given the New York-based company an Irish address and a lower tax rate.