New US inversion rules threaten Pfizer-Allergan merge deal

The US Treasury Department made new steps and inversion rules that is threatening the merger of two big drugmaker companies. The department focused on the curb tax-avoiding corporate 'inversions' in the $160 million merging deal of Pfizer and Allergan.

According to Herald Sun, the US inversion rule threatens the drugmakers' co deal as the US Treasury department sees the merging a potential casualty. The changes are done with less than a year before the Obama administration ends and it follows the sharp political criticism of the Pfizer and Allergan's merger which would mark the biggest deal in inversion history. Meanwhile, the shares of Dublin-based Allergan fell 22 per cent in after-market trading but in the process, Pfizer Inc rose a total percent of 3.

The companies said they are taking a look and reviewing the said department's notice as written by Yahoo. Their joint statement said "Prior to completing any review, we won't speculate on any potential impact."

Furthermore, President Barack Obama has repeatedly called for an action in the Republican-dominated US Congress regarding the inversions, but the lawmakers didn't do much. He has reportedly taken his appeal to the Congress on Monday and said he has welcomed the Treasury department's action.

Daily Mail reported that an Evercore analyst, Umer Raffat, published a review on the new rule. He said "in simple words, Allergan's key deals in the prior 36 months won't be counted (as far as meeting the inversion threshold is concerned) when doing the ownership math for the Pfizer-Allergan deal." He added that "The real issue is not so much what Allergan may prove or disprove, or whether Treasury overstepped its authority. The real question is whether Pfizer reads today's regulations as reason enough to not continue to pursue the deal."

Moreover, the agreement between the Pfizer and Allergan deal states they could terminate the negotiations if an adverse change is applied to the US law. Pfizer plans to have a domination in Ireland, where Allergan is based, and both of the companies expect the merge to be finalized within the year.

Tags

inversion rule, Allergan, Pfizer, US Treasury Department, Barack Obama, umer raffat, Dublin, Ireland, drugmaker, merger deal

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