Pfizer’s 150 billion-euro acquisition of Allergan is the healthcare industry’s biggest ever takeover, creating the world’s largest drug maker.
The world’s biggest ever “tax inversion” deal also enables the New York-based Pfizer to decamp to Ireland and massively reduce its corporate tax liability.
“If one looks at the tax structure in the United States versus other OECD (Organisation for Economic Co-operation and Development) countries, there’s a spread. There’s a differential. So inversions, a lot of these deals may be more a function of regulatory and tax policy than they are maybe of anything else,” said Stephen Wood, Chief Market Strategist with Russell Investments.
The combined company will be known as Pfizer Plc, whose value will soar above that of its rivals.
The companies say the merger, due for completion in the second half of next year, will deliver more than two billion dollars in cost savings over the first three years.
It will also open up their products such as Viagra and Botox to new markets.
Pfizer has long been trying to cut its US tax rate – failing 18 months ago to acquire UK-based AstraZeneca Plc that ran into stiff opposition. CEO Ian Read says the deal will help put the company “on a more competitive footing”.
President Obama has called tax inversions unpatriotic and has tried to crack down on the practice.