The speculation turned out to be true: Pfizer and Allergan announced today that they are canceling a proposed $160 billion merger, in large part due to steps the U.S. Treasury Department is planning to prevent tax avoidance.
Their stock prices started swinging late Monday as the companies began reviewing the new rules released that day by the Treasury Department, according to Reuters. The Wall Street Journal reported Tuesday that Pfizer’s board had voted to end the merger, and Reuters reported last night that the pharmaceutical giants would announce the termination of the merger today.
Both New York-based Pfizer and Dublin, Ireland-based Allergan cited the Treasury Department’s actions—which are aimed at preventing companies from avoiding taxes by moving to overseas places like Ireland where they are lower—as a reason for canceling the deal. There has long been speculation about how much difficulty the deal might have. Read Xconomy National Biotech Editor Alex Lash’s story on Allergan CEO Brent Saunders speaking at the J.P. Morgan Healthcare Conference in San Francisco in January here.
Even though the deal is being canceled, money will still be changing hands. Pfizer has agreed to pay Allergan $150 million—a sizable deal in its own right—for expenses associated with the transaction, according to the companies.