We can chalk this up as a huge win for the Obama administration: Pfizer’s backed out of that historic $160 billion merger with Allergan, thanks to Washington toughening up on corporate inversions.
Pfizer announced last year that it planned to merge with Ireland-based Allergan, raising the hackles of politicians on both sides of the aisle – it would, after all, signify enormous loss to the U.S. in the form of tax revenue. However, the Obama administration proposed just this Monday a set of new rules that would make these kinds of deals much more difficult, as Bloomberg points out:
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The Treasury Department said Monday that new rules would limit companies’ ability to participate in inversion transactions if they’ve already done them within the past 36 months. Allergan has been involved in several such acquisitions in that time frame. Representatives for Pfizer and Allergan declined to comment.
This pullout comes with a hefty price tag, however. Pfizer has to pay out $400 million to Allergan to cover expenses related to the deal, as CNBC first reported:
Sources told CNBC that while both companies believed the Treasury had overstepped the bounds of its regulatory authority with a crackdown on inversions, neither wanted to risk launching litigation against the U.S. government.
