What would have been the largest pharmaceutical merger in history – one between U.S.-based Pfizer and Ireland-based Allergan – has officially been scrapped. It was a deal that would have merged two pharma giants in a $160 billion mega-deal. Amidst the controversy surrounding so-called “tax inversions” President Obama has been working feverishly to put in place disincentives for any deal which aims to relocate a corporate headquarter to a more tax-friendly haven. In a statement today, Pfizer said:
“Pfizer today announced that the merger agreement between Pfizer and Allergan plc (NYSE: AGN) has been terminated by mutual agreement of the companies. The decision was driven by the actions announced by the U.S. Department of Treasury on April 4, 2016, which the companies concluded qualified as an “Adverse Tax Law Change” under the merger agreement.”
Pfizer will be required to pay Allergan a $150 million break-up fee to compensate them for the costs associated with the scrapped deal.
The new tax-inversion rule proposed by the U.S. Treasury would make tax inversion deals such as the Pfizer-Allergan merger less economically attractive.
The Treasury Department didn’t identify Pfizer’s deal in their statement on Tuesday, but US Treasury Secretary Jacob J. Lew said:
“Treasury has taken action twice to make it harder for companies to invert. These actions took away some of the economic benefits of inverting and helped slow the pace of these transactions, but we know companies will continue to seek new and creative ways to relocate their tax residence to avoid paying taxes here at home.”
The announcement sent shares of Pfizer up nearly 1% in early trading Wednesday morning, while U.S. shares of Allergan rose over 1.5%.
About Robert Henderson and Lansdowne Wealth Management
Robert Henderson is the President of Lansdowne Wealth Management, an independent, fee-only advisory firm in Mystic, CT. His firm specializes in financial planning and investment management for retirement, with a special focus on the particular needs of women that are divorced or widowed. He is an Accredited Asset Management Specialist and a Certified Divorce Financial Analyst. Mr. Henderson can be reached at 860-245-5078 or firstname.lastname@example.org. You can also view his personal finance blog, The Retirement Workshop at http://lwmwealth.com/blog and the firm’s website at http://www.lwmwealth.com.
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