Drug giant Pfizer is merging with Irish-based Allergan in a controversial deal aimed, at least in part, at avoiding US taxes.
But Pfizer’s CEO doesn’t want you to see it that way.
“First of all, I would like to say this is a great deal for America,” Pfizer chief executive Ian Read said in an interview with Allergan CEO Brent Saunders and CNBC’s Meg Tirrell, following the announcement on Monday.
“It allows us to continue to sustain an investment of, you know, approximately $US9 billion mainly spent in the United States. We have 40,000 combined employees in the United States. So I think it’s a great deal,” he continued.
That may not be how US lawmakers see the deal.
On Thursday, the Treasury Department released new rules to help block such deals and prevent companies from skipping out on US taxes.
According to The Wall Street Journal’s Richard Rubin, the rules make it harder for companies to transfer operations to new foreign parent companies. They also make it more difficult to buy foreign companies, and limit some of the other maneuvers companies would typically make in preparation for such a merger.
Last week’s rules are an addition to existing anti-inversion regulation, introduced in September 2014, following numerous high-profile inversions — and attempts — in 2013 and 2014. At that time, Treasury Secretary Jack Lew issued measures to disincentivize inversions, including a provision that the shareholders of the US-based firm cannot own 60% or more of the new company.
It was enough to kill a massive $US55 billion deal between pharmaceuticals AbbVie and Shire.
Allergan CEO Brenton Saunders speaks during an interview with CNBC on the floor of the New York Stock Exchange
‘Not just about tax benefits’
Read did not appear concerned about the regulation while speaking with CNBC.
“We’ve been engaged for the last year and a half with leaders in Congress,” he said.
The deal, however, “is not just about tax benefits,” Read added.
He said it’s about things like building “great franchises,” brighter portfolios, and greater growth. It will also enable Pfizer to capitalise on Allergan’s “open science, open development philosophy,” led by Saunders.
Of course, “there are benefits from tax,” Read said.
But, “if the benefits from tax weren’t there, I would still try to do the deal — but I suspect the price would be different.”
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