Pfizer's planned $160bn acquisition of Allergan was to be the largest inversion deal in history. However, Pfizer pulled the plug on the deal yesterday after the US government released its third and most stringent set of curbs on inversion takeovers—a move many feel specifically targeted the deal. An announcement from Pfizer said that the actions undertaken by the US Department of Treasury constituted an 'Adverse Tax Law Change' under the terms of the agreement, allowing for its termination.
'Inversion' bids describe a takeover structure whereby a US company merges a smaller foreign company in order to switch its domicile to a country with lower rates of corporate taxation. The technique has drawn heavy criticism from some politicians for steering tax dollars away from the American economy, with US president Barack Obama labeling inversion bids as an 'unpatriotic tax loophole.' Had Pfizer successfully re-headquartered in Dublin through its tie-up with Allergan, the pharma giant's corporate tax rate would have dropped from 35 per cent to just 12.5 per cent.
As curbs continue to mount, the future of the technique pioneered by Skadden, Arps, Slate, Meaghre & Flom isn't clear. Last year, inversion deals into Europe helped buoy Skaddens to become the first ever law firm to advise on more than $1 trillion worth of M&A deals in a single year—not to mention a record-breaking $3.8bn spent across the M&A market in 2015.
However, as advisers to Pfizer this is now the second major Skaddens inversion deal to collapse for the drugmaker after a failed attempt to tie-up with UK rival AstraZeneca in 2014.
Source: Legal Business
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