Pfizer terminates Allergan deal

PFIZER has terminated its mega-merger with Ireland’s Allergan, following changes to US tax laws.

The drugs giant said the cancellation “was driven” by changes the US Treasury announced two days ago to prevent mergers known as inversions, where a US firm ties up with an overseas rival to shift its headquarters to a country with a lower tax rate. In this case Pfizer would have moved from a 35% rate in the US to just 12.5% in Ireland.

The deal – worth around US$160bn – would have been the largest ever pharmaceutical sector merger and the largest example of an inversion. Such deals have come under fire from US politicians, including presidential candidates, concerned about tax income shifting abroad.

As well as the tax benefits, Allergan would have boosted Pfizer’s portfolio for both novel and established therapies, and given impetus to the long-standing call to divide up the company.

“We plan to make a decision about whether to pursue a potential separation of our innovative and established businesses by no later than the end of 2016,” said Pfizer CEO Ian Read.

Pfizer will pay Allergan US$150m for cancelling the deal. Allergan played down any impacts of the cancellation, reiterating what it describes as its “compelling standalone” profile.

The White House has denied that the rule changes were targeted at a specific deal but press secretary Josh Earnest said the administration would be “pleased” if inversion deals collapsed, the Wall Street Journal reports.