U.S. drugmaker Pfizer Inc. and Ireland-based Allergan Plc terminated their $160bn merger on Wednesday, due to a new U.S. Treasury tax rule which aims to block deals when companies move overseas to reduce taxes.
The merger would have allowed Pfizer to cut its tax bill by an estimated $1bn a year by domiciling in Ireland, where tax rates are lower.
Allergan Chief Executive Brent Saunders stated that the new Treasury rule would not stop the company from doing other stock-based acquisitions in the next two quarters of 2016.
Separately, Allergan would now move ahead with plans for its $40.5bn sale of its generic drug business to Israel’s Teva Pharmaceutical Industries. It expects the transaction to close by June 2016.
Pfizer will pay Allergan $150m to reimburse expenses from its deal.