April 7, 2016
The $152-billion proposed merger between Pfizer and Allergan hit a snag this week, and ultimately fell apart. The biggest stumbling block for the giant pharmaceutical companies came after the Obama administration introduced rules that limit tax inversions – a move where an American company acquires an overseas rival and reincorporates overseas.
The aggressive and expansive series of rule changes are aimed at curbing an American company’s ability to jettison its United States corporate citizenship for tax reasons. Allergan’s tax domicile is in Ireland, which made it an attractive inversion candidate for Pfizer.
Indications are that Pfizer is considering two options, either continuing to try to get bigger, or break apart. The company will reportedly pay Allergan $150 million to let the deal die.