Speculation of new targets as Pfizer scraps Allergan takeover

Latest News

The decision not to proceed with its proposed takeover of Allergan has triggered speculation Pfizer could renew its interest in other companies.

Pfizer and Allergan confirmed the decision to scrap their proposed US$160 billion proposed merger following changes announced by the US Treasury. The changes eliminated any tax benefit to US-based Pfizer of redomiciling to Ireland to take advantage of its lower corporate tax rate.

The companies said the changes qualified as an 'Adverse Tax Law Change' under the merger agreement. Pfizer has agreed to pay Allergan US$150 million for reimbursement of expenses associated with the transaction.

Pfizer CEO Ian Read said the company plans to make a decision about whether to pursue a potential separation of its innovative and established businesses by no later than the end of 2016.

The decision to scrap the takeover of Allergan has led to widespread speculation the company could pursue other potential targets, including Shire, GSK and AstraZeneca.

The share prices of all three companies rose on the speculation.

AstraZeneca successfully fought off a potential Pfizer takeover in 2014, while GSK was reported to have rebuffed an approach from the US-based company last year.

Analysts said that this week's tax changes were clearly targeted at the Pfizer's takeover of the BOTOX-maker because they essentially recalculated Allergan's market capitalisation by removing the impact of its significant recent M&A activity. They would not have the same impact on a GSK or AstraZeneca. However, US lawmakers could introduce other changes to undermine any future deals.

Mr Read has been a consistent critic of US corporate tax. He has argued that so-called 'tax inversions' are motivated by the the country's comparatively high and internationally uncompetitive corporate tax rates.