U.S. drugmaker Pfizer Inc (PFE.N) and Ireland-based Allergan Plc (AGN.N) walked away from their $160 billion merger on Wednesday, a major win for President Barack Obama, who has been pushing to curb deals in which companies move overseas to cut taxes.
Pfizer said the decision was driven by new U.S. Treasury rules aimed at such deals, called inversions. The merger would have allowed New York-based Pfizer to cut its tax bill by an estimated $1 billion annually by domiciling in Ireland, where tax rates are lower.
While the new Treasury rules did not name Pfizer and Allergan, one of the provisions targeted a specific feature of their merger – Allergan’s history as a major acquirer of other companies.
Allergan Chief Executive Brent Saunders said on CNBC television that the new Treasury rule would not stop the company from doing other stock-based acquisitions as soon as this fall. The new Treasury rule takes into account the past three years of a company’s deals.
“It really looked like they did a very fine job at constructing a temporary rule to stop this deal and obviously it was successful,” Saunders said.