Pfizer Inc is discussing the purchase of Allergan Plc for $ 150 billion, which could lead to the transfer of registration of one of the largest US pharmaceutical companies to Ireland, while the US Treasury prepares to announce a tightening of regulation in relation to inversions.
Pfizer is in talks to buy shares of Allergan at $ 370 - $ 380, said a source familiar with the negotiations. Shares of Allergan closed on the eve with $ 310.8.
Even if the talks have made progress over the past few days, it is still far until an agreement and the timing of it is unclear because the Ministry of Finance plans to tighten regulation.
This applies to the typical US multinational companies buying smaller competitors from other countries and the transfer of the entire company under the jurisdiction of the country to avoid US tax requirements. The most frequently chosen is Ireland and the management, however, remains in the United States.
"Later this week, we intend to announce additional management members, reducing the benefits of corporate inversions" - follows a letter from the Ministry of Finance, seen by Reuters.
Pfizer is not mentioned in the letter signed by the Minister and addressed to four legislators: Senators Ron Widen and Orrin Hatch and also the Congressmen Kevin Brady and Sander Levin. All of them work in Senate and tax commissions.
"We have no other comments in addition to what is written in the letter," - said a spokesman for the Ministry of Finance. Pfizer and Allergan also declined to comment.
"The fact that the American companies, including Pfizer, continue to consider inversions, makes apparent the need for further steps to stop this trend", - says Levin.
He called on Congress to change the law to stop such tax evasion.
The peak of inversions occurred in September 2014, when the Ministry of Finance has taken a number of steps, reducing the attractiveness of such action, and at the same time hampering new deals. It slowed deal flow, but has not reduced them to zero.
The association of Dublin based Allergan with the New York Pfizer can cause an unprecedented wave of consolidation in the pharmaceutical industry, as companies in the industry are looking for new drugs and ways to improve its assessment.
In addition to tax reasons, the deal will give Pfizer access to markets of aesthetic and ophthalmic products, which is dominated by Allergan, which will oust Johnson & Johnson (N: JNJ) from the position of the world's largest group of health care products.