After the U.S. Treasury Department
issued new tax-inversion rules Monday, the two companies decided to walk away,
Pfizer said in a statement Wednesday morning.
At $160 billion, it would have been the biggest pharma deal ever. It
would have moved Pfizer's official headquarters to Ireland and created the
world's largest drugmaker. And, before Treasury stepped in, it would have
satisfied Pfizer CEO Ian Read's longtime quest to cut its tax rate with an
overseas move.
Because Treasury's new rules qualified as an "adverse tax law
change" under their merger agreement, Pfizer's break-up penalty is small:
The company agreed to pay Allergan ($AGN) $150 million to reimburse expenses
associated with the transaction, Allergan said in a Wednesday morning
announcement.
Obviously, the deal's collapse is a disappointment on both sides, but
fans of a Pfizer split-up might take consolation in this: The company now plans
to decide by year's end whether to break into two separate businesses.
That's back to Pfizer's original timeline for a breakup decision, Read
said in a statement. The company had put off that deadline to 2018 after
agreeing to buy Allergan.
The company will also go back to looking for deal prospects and will
pursue "other shareholder friendly capital allocation opportunities,"
Read said.
Allergan CEO Brent Saunders, who would have been in line to take Read's
job down the line if the deal had gone through, said his company is well able
to deliver growth on its own. It will also have plenty of firepower to make
deals, particularly after it wraps up sale of its generics business to Teva
($TEVA) for $40.5 billion, he said.
Allergan also said that the new Treasury rules shouldn't affect its own
tax rate. The company's own tax headquarters moved to Ireland less than three
years ago with the acquisition of Warner Chilcott.
Pfizer Announces Termination of Proposed Combination
with Allergan
Wednesday, April 6, 2016 -
6:45am
NEW YORK,
N.Y., April 6 - Pfizer Inc. (NYSE: PFE) today announced that the merger
agreement between Pfizer and Allergan plc (NYSE: AGN) has been terminated by
mutual agreement of the companies. The decision was driven by the actions
announced by the U.S. Department of Treasury on April 4, 2016, which the
companies concluded qualified as an “Adverse Tax Law Change” under the merger
agreement.
“Pfizer
approached this transaction from a position of strength and viewed the
potential combination as an accelerator of existing strategies,” stated Ian
Read, Chairman and Chief Executive Officer, Pfizer. “We remain focused on
continuing to enhance the value of our innovative and established businesses.
Our most recent product launches, including Prevnar 13 in Adults, Ibrance,
Eliquis and Xeljanz, have been well-received in the market, and we believe our
late stage pipeline has several attractive commercial opportunities with high
potential across several therapeutic areas. We also maintain the financial
strength and flexibility to pursue attractive business development and other
shareholder friendly capital allocation opportunities.”
“We plan to
make a decision about whether to pursue a potential separation of our
innovative and established businesses by no later than the end of 2016,
consistent with our original timeframe for the decision prior to the
announcement of the potential Allergan transaction,” continued Read. “As
always, we remain committed to enhancing shareholder value.”
In
connection with the termination of the merger agreement, Pfizer has agreed to
pay Allergan $150 million for reimbursement of expenses associated with the
transaction.