Pfizer to buy Botox maker
NEW YORK, NY: Pfizer Inc on Monday said it would buy Botox maker Allergan Plc in a deal worth $160 billion to slash its U.S. tax bill, rekindling a fierce political debate over the financial maneuver.
The acquisition, which would shift Pfizer’s headquarters to Ireland, would be the biggest-ever tax inversion. The news prompted Democratic presidential front-runner Hillary Clinton to promise to propose measures to prevent the increasingly popular and controversial practice aimed at helping U.S. companies lower their taxes by re-incorporating overseas.
Shares of Allergan and Pfizer fell more than 2 percent as investors learned the merger, which would create the world’s largest drugmaker, would bring lower cost savings than they had hoped. It also would delay a decision by Pfizer on whether it would sell off its division consisting of products facing generic competition.
U.S. President Barack Obama has called inversions unpatriotic and has tried to crack down on the practice.
Senator Bernie Sanders, another Democratic candidate for president, called on the Obama administration to stop the deal, which “would allow another major American corporation to hide its profits overseas.”
“Congress also must pass real tax reform that demands that profitable corporations pay their fair share of taxes,” Sanders said.
To avoid potential restrictions, the transaction was structured as smaller, Dublin-based Allergan buying Pfizer, although the combined company will be known as Pfizer Plc and continue to be led by Chief Executive Officer Ian Read.
The U.S. Treasury, concerned about losing billions in tax revenue, has been taking steps to limit the benefits of tax inversion deals, but it admitted last week that it would take legislation from Congress to stop such moves.
The Allergan acquisition will delay New York-based Pfizer’s decision on whether to sell off its lower-margin unit by two years, until late 2018, the company said.
The deal enhances offerings from both Pfizer’s faster-growing branded products business, with additions like Botox, and its older established products unit. Still, investors had been hoping Pfizer would sell off the lower-margin business in 2017, a move now put off by the time required to integrate Allergan.
“The only thing I’d really say I’m disappointed about is Pfizer’s postponing their break up,” said Gabelli Funds portfolio manager Jeff Jonas. He called the delay decision “pretty conservative and a little late.”
Others were disappointed by other aspects of the deal, including the projected cost savings, and a lack of details on potentially increased share buybacks.