U.S. drug maker Pfizer has agreed to terminate its $160 billion agreement to acquire Botox maker Allergan Plc, in a major victory to U.S. President Barack Obama's drive to stop tax-dodging corporate mergers. Hayley Platt reports
It was set to be the biggest tax 'inversion' deal ever attempted. But Obama's proposal to tighten the rules has killed the tie-up between Pfizer and Allergan. The U.S. Treasury plans to prevent foreign companies bulking up on U.S. assets ahead of potential 'inversion' deals. And stop U.S. firms moving profits abroad. SOUNDBITE (English) CMC MARKETS, MARKET ANALYST, MICHAEL HEWSON, SAYS: "I always thought that the rationale behind the deal was a little bit suspect. There didn't appear to be any business reasons in terms of products overlap as to why the deal should go ahead I think it was purely done for tax purposes." Had the merger gone ahead. U.S. drugs giant Pfizer would have seen its tax bill drop by around 8 percent by redomiciling to Ireland where Allergan is based. But Allergan shareholders needed to own at least 40 percent of the combined company for both firms to enjoy full tax benefits. And a new "three-year-look-back rule" made that difficult as it excluded recent deals made by them. SOUNDBITE (English) CMC MARKETS, MARKET ANALYST, MICHAEL HEWSON, SAYS: "It's clearly targetted at Allergan which has grown as a result of acquisition and as such I don't expect it to have a significant affect, that's not to say that it's closing the loophole entirely but I certainly think in the context of this particular deal it's probably nixed it once and for all." Pfizer will now have to pay a $400 million break fee to Allergan. Instead of enjoying substantial gains if the deal had gone ahead.