Pfizer Confirms Termination of $160B Allergan Merger

Pfizer Inc. and Allergan Plc agreed to terminate their $160 billion merger, an abrupt end to the largest-ever health-care acquisition as officials in Washington crack down on corporate inversions.

The U.S. Treasury Department’s proposed new rules to deter inversions drove the decision, the companies said Wednesday in a statement. New York-based Pfizer will pay Allergan $150 million in reimbursement for expenses associated with the transaction.

Pfizer will decide whether to pursue a potential split of the company by no later than the end of this year. The split would probably involve two parts: one focused on new drug development, the other on selling older medications.

“One of the reasons we held the stock was because there was supposed to be a breakup of the company coming, which obviously would have been delayed with the Allergan deal,” said Dan Mahony, who helps manage including health-care funds at Polar Capital LLP in London, in an interview. “Maybe they’d dust that plan back off again.”

The termination represents a victory for President Barack Obama, whose administration proposed tougher-than-expected new rules aimed at making inversions like the Pfizer-Allergan deal harder to achieve. In an inversion, a U.S. company shifts its tax address overseas, often through a merger.

Allergan, which is run from New Jersey but has a legal domicile in Dublin, last year agreed to merge with Pfizer in a deal that would have given the New York-based company an Irish address and a lower tax rate.

Pfizer rose 1 percent in trading before the opening of U.S. markets, while Allergan declined less than 1 percent.

Pfizer still plans to report first-quarter earnings on May 3.

Bloomberg

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell