Tags: new | tax | rule | threaten | pfizer | allergan | deal

New Tax Rule Threatens Pfizer-Allergan Deal

Image: New Tax Rule Threatens Pfizer-Allergan Deal
(Photo by Scott Eisen/Bloomberg via Getty Images)

By    |   Tuesday, 05 Apr 2016 05:42 PM

A new Treasury Department rule against corporate inversions threatens a merger between U.S.-based Pfizer and Ireland-based Allergan and has sent Allergan stock prices tumbling.

The planned $160 billion merger would be the second-largest takeover ever, CNN Money reports.

The deal was announced in November and would move Pfizer's headquarters to Ireland, where corporate taxes are lower than in the United States.

The Obama administration has long criticized inversions, which allow American companies to continue to operate in the United States while reincorporating in another country, with the corporation in the other country owning the assets of the new company.

Monday's rule by Treasury was its third against corporate inversions, but this time it was much more severe than the previous two and caught experts and corporations by surprise, The Wall Street Journal reported.

Shares of Botox-maker Allergan dropped by 16 percent Tuesday, taking away $18 billion of the Allergan's market capitalization. Shares of Pfizer were up only 1 percent.

Monday's rule hits what the government calls "serial inverters," which are created by multiple inversions with U.S. companies, by disregarding the American assets acquired by those companies for the previous three years.

Also, the rule limits "earnings stripping," in which foreign companies lend money to their U.S. subsidiaries, which create interest payments that can be deducted on U.S. taxes.

"This regulation will effectively kill inversions, probably including the Allergan-Pfizer deal," Greg Valliere of Horizon Investments, told CNN.

"It certainly puts a crimp in the deal and it's not out of the question I suppose that Pfizer would want to rethink the transaction given the development," New York-based tax analyst Robert Willens told the Wall Street Journal.

Treasury Secretary Jack Lew wasn't yielding in his statement announcing the changes.

"Many of these companies continue to take advantage of the benefits of being based in the United States — including our rule of law, skilled workforce, infrastructure, and research and development capabilities — all while shifting a greater tax burden to other businesses and American families," Lew said.

Pfizer has been a vocal opponent of U.S. tax rates and in 2014 attempted unsuccessfully to merge with British drug maker AstraZeneca, citing tax policy as the reason.

© 2017 Newsmax. All rights reserved.

   
1Like our page
2Share
Newsfront
A new Treasury Department rule against corporate inversions threatens a merger between U.S.-based Pfizer and Ireland-based Allergan and has sent Allergan stock prices tumbling.
new, tax, rule, threaten, pfizer, allergan, deal
361
2016-42-05
Tuesday, 05 Apr 2016 05:42 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
America's News Page
© Newsmax Media, Inc.
All Rights Reserved