NEW YORK • 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 it for long-term growth.
The biggest drug maker in the United States decided to walk away from its US$160 billion (S$217 billion) merger with Dublin-domiciled firm Allergan, a person familiar with the matter said, marking an abrupt end to what would have been the largest-ever deal in the pharmaceutical industry.
The tougher-than-expected new rules announced by the Obama administration on Monday were aimed at making inversions like the Pfizer-Allergan deal harder to achieve.
In an inversion, a US company shifts its tax address overseas, often through a merger. In the Pfizer-Allergan deal, the new company would have been located in Ireland.
Pfizer will now need to pay a US$400 million fee to Allergan for expenses relating to the deal, sources said.
Pfizer and Allergan declined to comment on the deal.
Pfizer's planned mega-merger with Allergan was historic in scale and ambition. The deal would have burnished Pfizer's drug portfolio and created a pharmaceutical giant, with a strong line-up ranging from advanced cancer treatments to generics. Yet it was also a tie-up designed to reap tax savings.
The Treasury Department said on Monday that new rules would limit companies' ability to participate in inversion transactions if they have already done them within the past 36 months. Allergan has been involved in several such acquisitions in that time frame.
Pfizer had been examining how it might be able to challenge new rules from the US Treasury Department, people with knowledge of the matter said earlier.
Since the first inversion in 1982, 53 US companies have shifted their tax addresses offshore - 22 of them since 2012.
Besides Pfizer-Allergan, other pending inversion deals that have not yet closed include the proposed US$16.5 billion merger of Johnson Controls with Ireland-based Tyco International.