Pfizer's used a tax-dodge called a "reverse-inversion" to sell itself to a much smaller, Irish pharma company, moving its corporate nationality to Ireland at the stroke of a pen.
This paper-shuffle maneuver has been characterized as an "unpatriotic loophole" by President Obama, and according to Pfizer, it will save the company $2b/year for the first three years. The new company will be called "Pfizer," it will sell Pfizer's products, and it will have the same US offices and facilities that Pfizer has — but it will be, technically, Irish, and subject to a much lower tax rate.
But Pfizer's reverse-inversion skirts the rules, in part by keeping ownership split somewhat evenly between the two companies. After the deal is complete, current shareholders of Allergan, which has the majority of its operations in the US, will own 44 percent of the mega company. The remaining 56 percent will be owned by current Pfizer shareholders.
In Monday's announcement, Pfizer said that the deal will deliver $2 billion in cost savings per year for the first three years. By 2018, the combined company, which will also be called Pfizer, will have an operating cash flow of $25 billion.
The merged company will also enjoy a 17 to 18 percent tax rate, Pfizer said. That's down from Pfizer's current US tax rate of about 25 percent.
With $160 billion merger, Pfizer moves to Ireland and dodges taxes
[Beth Mole/Ars Technica]
(Image: Hat Saint Patricks Day, Liftarn, public domain)