Pfizer has walked away from its record-breaking $160 billion deal with Allergan.
The decision comes just days after action from the US Treasury to make such tax-inversion deals less attractive, a move widely believed to have been taken in direct response to the pharma giant’s headline-grabbing announcement.
Under the planned changes, a new, Dublin-headquartered Pfizer would have been exposed to just 12.5% corporation tax, rather than its current 35%.
Instead, Pfizer will pay a $150 million termination fee to Allergan and will explore separating its businesses. Commenting on the decision, chairman and CEO Ian Read stated:
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.
Analysts have long recommended a break-up of this kind, citing the boost to shareholder value that followed Abbot’s highly successful spin-off of Abbvie in 2013.
Shares in Pfizer rose by about 1% following the announcement, while Allergan dipped slightly. Chief and president of Brent Saunders commented:
While we are disappointed that the Pfizer transaction will no longer move forward, Allergan is poised to deliver strong, sustainable growth…Our pipeline is one of the strongest in the industry, loaded with 70 mid-to-late stage programs including 14 expected approvals and 16 regulatory submissions in 2016 alone.
Allergan will continue with the $40 billion divestment of its generics business to Teva, promising a balance sheet boost that will promote confidence in the company’s growth potential.