The boards of Pfizer and Allergan announced November 23 that the two have entered into a definitive merger agreement to create the world’s biggest drug maker by sales, with the transaction stated to close in 2016’s second half. And while the scale of the merger is greater than anything seen in the pharmaceuticals industry to date, the focus, more than anything else, has fallen on its tax implications.
The merger, once completed, will see Pfizer relocate to Dublin and the company’s tax bill shrink considerably
“The combination of Allergan and Pfizer is a highly strategic, value-enhancing transaction that brings together two biopharma powerhouses to change lives for the better,” said Brent Saunders, Chief Executive of Allergan, in a statement. Chairman and Chief Executive of Pfizer, Ian Read, added, “Through this combination, Pfizer will have greater financial flexibility that will facilitate our continued discovery and development of new innovative medicines for patients, direct return of capital to shareholders, and continued investment in the United States, while also enabling our pursuit of business development opportunities on a more competitive footing within our industry.”
The merger, once completed, will see Pfizer relocate to Dublin and the company’s tax bill shrink considerably. Obama has in the past labelled inversion deals like this “unpatriotic” and American politicians have been quick to condemn the practice. Republican candidate Donald Trump said in a statement, “The fact Pfizer is leaving our country with a tremendous loss of jobs is disgusting,” whereas Hillary Clinton said inversion deals would “leave US taxpayers holding the bag.”
According to the FT, Pfizer’s shift to Ireland should generate a one-off earnings windfall of up to $21bn, and the company’s reported tax rate will likely fall from 26 percent currently to as little as 17 percent.
