The U.S. Treasury Department has taken steps to curb tax-avoiding corporate ''inversions.'' As Hayley Platt reports, the pending $160 billion merger of Pfizer and Allergan is seen as a potential casualty.
Pfizer's $160 billion union with Allergan could end in divorce before they've even made it to the alter. It's all down to new harsher U.S. tax inversion rules that threaten to scupper the deal. Investor sentiment reflected in the share price hours after U.S. markets closed on Monday. SOUNDBITE (English) HENDERSON GLOBAL INVESTORS, HEAD OF GLOBAL EQUITIES, MATTHEW BEESLEY SAYING: "Allergan shares fell very heavily by over 20 percent and Pfizer rose modestly reflecting relief on behalf of Pfizer shareholders that this deal will not occur and disappointment on behalf of Allergan shareholders that this deal may yet fall apart." The changes will certainly make the deal less attractive. At the moment U.S. firms can buy a foreign company and make that their headquarters in order to benefit from lower tax rates. Ireland for example, where Allergan is based - is well known for its friendly tax treatment of multinationals, including Apple and Google. The U.S. Treasury plans to prevent foreign companies bulking up on U.S. assets ahead of any potential deal. And stop U.S. firms moving profits abroad. SOUNDBITE (English) HENDERSON GLOBAL INVESTORS, HEAD OF GLOBAL EQUITIES, MATTHEW BEESLEY SAYING: "I think if there is a change in U.S. tax inversion laws you can expect to see an increased level of investor scepticism towards all companies that have what might be considered to be a lower than average tax rate." Pfizer's takeover of Allergan is expected to be completed in the second half of the year. If it goes ahead, it would be the largest inversion deal ever.