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Obama's inversion curbs kill Pfizer's $160 billion Allergan deal

Published: April 6, 2016
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Source: Reuters

NEW YORK Shares in Allergan Plc (AGN.N) opened down more than 15 percent on Tuesday, a day after the U.S. Treasury Department proposed new tax regulations that analysts said could kill its $160 billion agreement to be bought by Pfizer Inc (PFE.N).

Pfizer's deal to buy Dublin-based Allergan was conceived under rules that would have allowed the company to move its headquarters to Ireland and lower its tax rate. The government has been trying to stop that type of deal, called a tax inversion.

Late on Monday, the Treasury Department introduced a regulation that would negate the tax benefits of Pfizer's acquisition of Allergan.

Allergan shares were trading down 15.3 percent at $235 on the New York Stock Exchange. Pfizer shares rose 1.6 percent to $31.20.

“By how the stocks are trading, the market thinks the deal is almost dead,” said Les Funtleyder, healthcare portfolio manager at E Squared Asset Management in New York, whose firm holds Pfizer shares.

On Monday night, Pfizer said that it was reviewing the notice and declined to speculate on whether the deal would go forward.

"To us, whether Pfizer and Allergan stay committed will be known shortly - more important for many is if the deal breaks, where should Allergan trade?" Wells Fargo analyst David Maris wrote in a research note on Tuesday morning.

Maris lowered his valuation range for the stock to a range of $265 to $270 from a range of $345 to $350.

 

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