Morning Briefing
Summaries of health policy coverage from major news organizations
Pfizer-Allergan Deal Off Following New Tax Regulations Targeting Inversions
The Wall Street Journal: Pfizer To Walk Away From Allergan Deal
Pfizer Inc. has decided to kill its planned $150 billion takeover of Allergan PLC, after the Obama administration took aim at a deal that would have moved the biggest drug company in the U.S. to Ireland to lower its taxes, according to people familiar with the matter. The companies are expected to announce the deal’s termination as early as Wednesday morning, after Pfizer’s board voted Tuesday to halt the combination and the New York-based pharmaceutical company then notified Dublin-based Allergan, the people said. (Rockoff, Hoffman and Rubin, 4/5)
The New York Times: Pfizer And Allergan Are Said To End Merger As Tax Rules Tighten
The decision is a victory for the Obama administration, which introduced the initiatives as part of an effort to thwart the ability of companies to move income overseas, beyond the reach of the United States. The proposed regulations, announced on Monday by the Treasury Department, appeared specifically to target Pfizer and Allergan, which has its tax domicile in Ireland. Still, tax experts said that other transactions would also be affected. When Pfizer and Allergan announced their deal in November, they knew that the Obama administration would take aim at it. But the companies and their advisers were stunned when the Treasury Department took highly aggressive steps in removing many of the tax benefits of the merger. (De la Merced and Picker, 4/5)
The Associated Press: Analysts: New Inversion Rules Will Kill Pfizer-Allergan Deal
“The Obama administration isn’t just sending a message to Pfizer, it’s sending a message to all U.S. companies contemplating inversions, and that message is ‘Don’t,” said analyst Steve Brozak, president of WBB Securities LLC. Investors seem to view the deal as dead, and were trading shares in the two companies at a furious pace Tuesday. (Johnson, 4/5)
Reuters: Obama's Inversion Curbs Kill Pfizer's Allergan Deal
Several U.S. presidential candidates, including Republican Donald Trump and Democrats Hillary Clinton and Bernie Sanders, have seized on the issue in their campaigns. "We have so many companies leaving, it is disgraceful," Trump told reporters as he greeted voters in Waukesha, Wisconsin on Tuesday. Clinton and Sanders both expressed support for Treasury's plan. (Humer, Pierson and Barbaglia, 4/6)
The Wall Street Journal: Allergan’s Inversion Problem: There Is A Plan B
What is yet unclear is how this will affect any breakup fees. Even if Allergan had been on the hook for these, though, they likely wouldn’t have been that onerous. The break fee is $3.5 billion under certain circumstances, but drops to $400 million in the event of adverse changes in tax law. And, amidst disappointment for shareholders, Allergan could be well-positioned to form a Plan B. That is because Allergan is set to divest its generics business to Teva Pharmaceuticals for more than $40 billion in cash. That deal, which is expected to close in the near future, will give Allergan’s balance sheet a much-needed refresh. After all, net debt exceeded $41 billion at the end of 2015, according to FactSet. (Grant, 4/5)
The Washington Post: Obama Criticizes Companies That Leave U.S. For Lower Taxes
President Obama made a forceful case Tuesday for stopping corporations from moving their headquarters overseas to avoid U.S. taxes, saying they are taking advantage of the American economic system and saddling the middle class with the bill. These companies “effectively renounce their citizenship,” Obama said at a White House news briefing. “They declare that they’re based somewhere else, thereby getting all the rewards of being an American company without fulfilling the responsibilities to pay their taxes the way everyone else is supposed to pay them.” (Merle, 4/5)
Bloomberg: Pfizer Needs A New Rx For Growth As Allergan Mega-Deal Unravels
Pfizer is set to be thwarted for the second time in less than two years in its pursuit of a transformative, tax-powered deal to position the biggest U.S. drugmaker for long-term growth. The Obama administration has pretty much made sure there won't be a third try. Pfizer decided to walk away from its $160 billion merger with Allergan, a person familiar with the matter said. That would mark an abrupt end to what would have been the largest-ever deal in the pharmaceutical industry. It's also a remarkable turning point in the white hot, election-cycle debate in the U.S. over corporate tax avoidance. (Chen, 4/5)
