Allergan CEO: Merger with Pfizer was targeted by US government
Pfizer and Allergan on Wednesday terminated their $160 billion merger after changes in U.S. tax regulations dealt a death blow to the deal.
Pfizer will pay Allergan a $400 million break fee as per the merger agreement, sources told CNBC.
Pfizer stock was up slightly in Wednesday’s premarket after closing up just over 2 percent at $31.36 on hopes that the company would dump the merger or renegotiate more favorable terms.
Allergan shares were down 1 percent in premarket trading after falling 14.7 percent on Tuesday to $236.55 each.
“While we are disappointed that the Pfizer transaction will no longer move forward, Allergan is poised to deliver strong, sustainable growth built on a set of powerful attributes,” CEO and President Brent Saunders said in a statement. “Leading therapeutic franchises with strong brands across seven therapeutic areas provide the foundation for continued strong growth in 2016 and beyond.”
New regulations issued Monday by the U.S. Treasury will prevent so-called inversion deals — under which a U.S. company moves its base to a country with a more favorable taxation environment — removing the tax benefits New York-based Pfizer had hoped to gain from the deal with Ireland’s Allergan.
Pfizer had reportedly stood to cut its costs by more than $1 billion a year by changing its domicile.
Sources told CNBC that while both companies believed the Treasury had overstepped the bounds of its regulatory authority with a crackdown on inversions, neither wanted to risk launching litigation against the U.S. government.
Pfizer announced in November that it would buy Botox-maker Allergan for $363.63 a share, in what would have been the largest-ever heath sector deal. It also said it would likely move its global headquarters from New York to Ireland.
Analysts said at the time that the proposed tax benefits helped justify the hefty price Pfizer had offered for Allergan.
The move came despite then-pressure from the White House on Congress to take legislative action to prevent inversion deals.
This pressure was ramped up on Tuesday, when President Barack Obama praised the Treasury’s new rules and again urged Congress to take action to stop U.S. companies from doing inversion deals.
“While the Treasury Department’s actions will make it more difficult … to exploit this particular corporate inversions loophole, only Congress can close it for good,” Obama said.
U.S. presidential candidates Republican Donald Trump and Democrats Hillary Clinton and Bernie Sanders have also criticized inversion deals during their campaigns.
Source: CNBC
Subscribe
If you enjoyed this article, subscribe to receive more just like it.
