Pfizer and Allergan to merge in $160 billion inversion
Pfizer and Allergan on Monday morning announced they would merge in a massive, $160 billion deal that will create the world's largest drugmaker, producing treatments as varied as Lipitor and Botox.
The deal is structured as a reverse merger, with smaller Dublin-based Allergan buying New York-based Pfizer, and it is likely to renew concerns over "inversions," where U.S. companies are bought by or merge with foreign firms in order to reduce U.S. corporate tax burdens. In a press release, Pfizer said the combined company would generate more than $2 billion in savings over the first three years and would enjoy a tax rate of 17 to 18 percent -- far less than Pfizer's current corporate tax rate of 25 percent.
Just days ago, the U.S. Treasury Department issued rules seeking to crack down on these types of deals, which President Obama has labeled "unpatriotic."
[Pfizer-Allergan merger shows why it's so hard to stop tax-dodging companies]
Last year, several such inversion deals fell apart and sparked scrutiny of corporate tax loopholes. In October 2014, Chicago-based AbbVie and Dublin-based Shire called off a $54 billion inversion deal after the Treasury issued new rules. That same month, Raleigh, N.C.-based Salix Pharmaceuticals and the Italian firm, Cosmo Pharmaceuticals SpA terminated a reverse merger, citing changes in the political environment.
In a call with analysts, Pfizer chief executive Ian Read said that Pfizer appreciates the attention to inversions from politicians, presidential candidates, and Treasury but decided to proceed.
"On the political risk, we've assessed this deal looking at the present regulations, the new notices, and all the information we can glean, and we believe this deal is a great deal for shareholders, both of Allergan and Pfizer," Read said.