Pfizer and Allergan reached an agreement to combine operation in November last year. However, the U.S. Treasuries issued a regulation targeting the merger. It seems that both companies must walk away from the merger plan.
Merger between U.S. company Pfizer and Ireland's Allergan will create the largest drugmaker in the world. Following the merger, Pfizer will move its headquarter to Ireland. President Obama had criticized the merger plan, calling it unpatriotic.
On Monday, United States Treasury Department issued a regulation to prevent tax-avoiding inversion deal. The inversion deal is a deal which a U.S. company reincorporate overseas after acquiring a foreign company. This regulation marks a new attempt by the U.S. government to hinder the practice that reduces tax collection.
"Our actions can only slow the pace of these transactions. Only legislation can decisively stop them," Lew said on a conference call, as quoted by CBS News. He also asked the Congress to pass the legislation.
On the other hand, Allergan CEO Brent Saunders told CNBC the new rule from Obama's administration is issued to target merger between Pfizer and Allergan.
"It really looked like they did a very fine job of constructing a rule here — a temporary rule — to stop this deal, and obviously it was successful," Saunders told CNBC during the "Squawk on the Street" business talk show. .
CEO Sanders said provision in rules to impose a three-year limit on foreign companies that enlarge its U.S. assets to avoid ownership requirements was designed to block the Pfizer-Allergan deal. He said, "For the rules to be changed after the game has started to be played is a bit un-American, but that's the situation we're in."
Sanders further said to follow the rules which the Congress had set for companies looking to move to foreign domicile.
The legislation required a bipartisan compromise between Republicans and Democrats in Congress to have the approval. Senate Finance Committee Chairman Orrin Hatch, R-Utah, said that to achieve that, it requires stronger leadership from the White House. The Obama administration was under criticism for not focusing on the problems of the companies leaving the U.S. soil.
The apparent target of the regulation is a specific deal between Pfizer and Allergan has also drawn criticism from Former Texas Governor Rick Perry. In an interview with Fox News, Rick Perry said, "If the president wants to address why businesses are leaving this country, he ought to address the corporate tax rate, not decide arbitrarily that he's going to change the rules in the middle of the game."
Pfizer and Allergan will have to scrap their merger deal over the new rules. On Monday, Treasury Department issued a regulation to tighten the tax inversion.
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