Pfizer and Allergan abandon merger

Pfizer and Allergan cancelled their $160bn merger. This follows proposed amendments to US tax laws to prevent tax-inversion details that US companies have been using to move to low-tax jurisdictions.

Under the proposed acquisition, Pfizer would have moved its headquarters to Dublin, where the corporation tax rate is 12.5%, against 35% in the US.

The merger would have been the largest pharmaceutical merger and the largest tax-inversion deal in history, and the decision to terminate is seen as a major victory for the US government, whose previous initiatives to discourage tax-inversions have failed (1).

Pfizer, best known for Viagra and its cholesterol pill Lipitor, will now pay the Botox producer Allergan $150m for pulling out of the deal (2).

Both companies issued statements to reassure investors that the future remains bright without merging.

Pfizer Chairman and Chief Executive, Ian Read, said: “Pfizer approached this transaction from a position of strength and viewed the potential combination as an accelerator of existing strategies (…) we remain focused on continuing to enhance the value of our innovative and established businesses”.

Allergan’s Chief Executive, Brent Saunders, said: “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.

“The company is also poised to deliver additional growth opportunities from its attractive financial profile and balance sheet” (3).

Analysts have, however, speculated that Pfizer needed to continue to look to acquisitions to grow its business, leading to speculation that UK-listed AstraZeneca could again be targeted following the failed takeover attempt in 2014 (4).

A record $3.8 trillion of mergers were announced in 2015, although roughly half of the transaction volume have yet to be finalised. The largest of these outstanding mergers has now failed to complete, and others threaten to do so (5).



[1] Financial Times. ‘Collapse of $160bn Pfizer & Allergan merger shocks corporate US’.

[2] The Guardian. ‘Pfizer’s merger collapse prompts speculation it will seek new takeover’.

[3] The Telegraph. ‘Pfizer and Allergan terminate $160bn merger following US tax crack-down’.

[4] BBC News. ‘Pfizer abandons $160bn Allergan deal’.

[5] Bloomberg. ‘Merger meltdown’.

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