Pfizer abandons $160m merger with Allergan after US tax crackdown

The deal, valued at $160bn, would have been the biggest example of an “inversion”.

Pfizer, best known for Viagra and its cholesterol treatment Liptor, was seeking to domicile itself in Ireland in a so-called “tax inversion” deal (Getty)

Pfizer has confirmed that its merger agreement with Botox maker Allergan “has been terminated by mutual agreement” after the Obama administration took steps to clamp down on tax avoidance deals on Tuesday.

The decision to end the $160 billion (£113bn) merger, the biggest pharmaceutical deal in history, comes two days after the US Treasury announced fresh plans to prevent deals known as “inversions”, where a US firm merges with a company in a country with a lower tax rate.

The companies agreed to terminate the deal by mutual agreement. and said the decision was driven by the actions announced by the US Treasury on Monday, which the companies concluded qualified as an "adverse tax law change'" under the merger agreement.

Pfizer said it would pay Botox-maker Allergan $150 million “for reimbursement of expenses associated with the transaction”.

The decion comes as a major victory to US President Barack Obama's drive to stop tax-dodging corporate merger.

"While the Treasury Department's actions will make it more difficult... to exploit this particular corporate inversions loophole, only Congress can close it for good," President Obama said on Tuesday.

US presidential candidates Republican Donald Trump and Democrats Hillary Clinton and Bernie Sanders have also criticised inversion deals during their campaigns.

Pfizer, best known for Viagra and its cholesterol treatment Liptor, was seeking to domicile itself in Ireland in a so-called “tax inversion” deal that would have substantially reduce the taxation the combined company would pay in the US.

It stood to reduce its taxes liability on more than $128 billion of profits stored abroad.

If the deal is abandoned, the setback would be a blow to Ian Read, Pfizer chairman and chief executive, after a similar tax-driven $69 billion bid to buy AstraZeneca that would have seen it relocate to the UK just over a year ago also failed to complete.

Pfizer shares had ended trading in New York on Tuesday up 2 per cent on hopes the company would walk away or renegotiate the deal in its favour. Allergan shares closed down 14.8 per cent to their lowest level since October 2014.

Additional reporting by Reuters