New Tax Rules Halt Pfizer's $160bn Botox Buy

Pfizer (NYSE: PFE - news) and Botox-maker Allergan (NYSE: AGN - news) have halted their record $160bn merger citing new US Treasury rules to make controversial so-called "tax inversions" less lucrative.

Pfizer - best known for producing Viagra - had wanted to slash its tax bill by moving its headquarters to Ireland (Other OTC: IRLD - news) , where Allergan is based and corporate tax rates are lower.

Both companies confirmed their mutual decision to call off the deal in a statement, just days after the tax proposals were unveiled by the government in a deliberate attempt to scupper the tie-up.

A marriage would have created the world's largest pharmaceutical company and allowed Pfizer to trim its tax bill by an estimated $1bn annually.

Pfizer said the decision was driven "by the actions announced by the US Department of Treasury on 4 April, which the companies concluded qualified as an “Adverse Tax Law Change” under the merger agreement.

It (Other OTC: ITGL - news) said that Allergan was to be paid $150m to cover its costs.

Pfizer chief executive, Ian Read, said: "Pfizer approached this transaction from a position of strength and viewed the potential combination as an accelerator of existing strategies.

"We remain focused on continuing to enhance the value of our innovative and established businesses", he said, adding: "we remain committed to enhancing shareholder value."

His opposite number at Allergan, Brent Saunders, said in a separate statement that while he was "disappointed" the merger would not proceed, his company was "poised to deliver strong, sustainable growth built on a set of powerful attributes."

The decision to abandon the tie-up marked a major victory for US President Barack Obama, who has blasted global tax avoidance and urged Congress to target "inversions" - the legal practice of shifting a tax base overseas.

It is a cause that has united presidential candidates on the campaign trail, with Republican Donald Trump joining Democrats Hillary Clinton and Bernie Sanders in opposing such moves by companies.

This is not the first time a tightening of the inversion rules has halted a pharma merger.

AbbVie (LSE: 0QCV.L - news) abandoned its $55bn takeover of Ireland-domiciled Shire (Xetra: S7E.DE - news) in 2014.