Facing new measures by the U.S. Treasury to thwart tax-evading deals, drugmaker Pfizer has officially jettisoned its $160 billion agreement to buy Allergan, according to published reports.
Pfizer is unwilling to change the terms of the deal, an anonymous source told Reuters on Tuesday. Under the new rules, the attempt at a partnership would no longer have benefitted from a move to Ireland.
The companies confirmed Wednesday that they had mutually agreed to abandon the deal, with Pfizer doling out $150 million to Allergan in a so-called "breakup fee," reports say.
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The Treasury implemented the new rules on Monday in an effort to prevent companies from moving abroad to shrink their tax bills. Entities that do so typically keep their management and core operations in the United States while claiming a new tax home.
Pfizer had been concerned that President Barack Obama's administration would tweak the rules again to sink the deal, Reuters reported.
The source told Reuters the company's lawyers had presented alternative ways for the two companies to salvage the tax inversion, but that these alternatives were unappealing to decision-makers. Complicating the initial partnership was the Treasury's decision impose a three-year limit on foreign companies bulking up on U.S. assets to avoid ownership limits for a later inversion deal.
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This means Allergan's latest deals will not be counted, and the business fails to meet the ownership requirements for the now-nixed Pfizer partnership. Those deals include a $66 billion merger of Allergan and Actavis, a $25 billion purchase of Forest Laboratories and a $5 billion takeover of Warner Chilcott.
Following the dismantling of their deal, Pfizer and Allergan pledged to pursue independent growth strategies pegged to their developments of potential new pharmaceutical therapies, reports say.