Tax breaks eyed in huge pharma merger

US based Pfizer has announced yesterday a $160bn merger with Ireland-based Allergan to create the world's biggest pharmaceutical group and shift to a lower-tax jurisdiction, despite US government policies discouraging such deals. The deal, the biggest merger announced this year and, if completed, the second-largest takeover yet, combines Pfizer's vast portfolio of drugs and vaccines addressing cancer, rheumatoid arthritis and other ailments, with smaller rival Allergan's holdings that include anti-wrinkle treatment Botox as well as treatments for eye care, dermatology and urology.

Executives emphasised the benefits of marrying the two companies' drug portfolios and research departments and achieving about $2bn in operational savings. The companies also said the transaction would lower Pfizer's tax rate to the Irish levy of 17 percent-18 percent. Pfizer executives said they were confident the deal would not flout US rules discouraging so-called inversions, including new measures announced last week by the US Treasury department. Pfizer's tax rate in the US is about 25 percent. US President Barack Obama has called inversions unpatriotic and has tried to crack down on the practice. To avoid potential restrictions, the transaction was technically structured as smaller Dublin-based Allergan buying Pfizer, although the combined company will be known as Pfizer and continue to be led by current CE Ian Read.