Pfizer makes corporate inversion

Published: November 27, 2015


Staff Writer

Big news came out this week on Monday when it was revealed that global biopharmaceutical giant Pfizer Inc. has plans to merge with fellow biopharmaceutical company Allergan PLC to create what will be the world’s largest drug-maker, Pfizer PLC, that will boast around a whopping $360 billion market cap.

For Pfizer Inc. the massive merger, valued by analysts at $160 billion, seems to have one main play that benefits the company. The deal incorporates Pfizer Inc. relocating to Allergan’s home turf in Dublin, Ireland, where Pfizer PLC would continue its operations under current Pfizer Inc. CEO Ian Read. What is the benefit of this for Pfizer? Well, according to “The Pacific,” Ireland has one of the lowest corporate tax rates in the world, second only to Switzerland. Pfizer estimates that they will save upwards of $2 billion dollars strictly in taxes if their operations are moved from New York City to Dublin.

This is a factor that indubitably has stakeholders excited, however that excitement might be offset by the fact that Allergan accumulated a net loss of over $1.6 billion in 2014 according to Yahoo! Finance. Surely investors are curious as to how the Botox manufacturer is going to turn around their profits, but it does not seem to be too much of a concern.

This merger has made a large impact in the news based off the effect that it will have on the United State’s economy. Not only would this merger mean billions of accrued tax dollars lost for the government, it would also mean Pfizer Inc. removing their headquarters out of the country. This will certainly create some type of stir in the unemployment market as the $210 billion company employs around 80 thousand workers according to Google. Presidential candidate Donald Trump stated in an interview that “the fact that Pfizer is leaving our country with a tremendous loss of jobs is disgusting,” and President Obama claimed it was unpatriotic since most of Pfizer’s operations will still be here in America.

As though Big Pharma has not been scrutinized enough in the past few months, many politicians are looking into this type of out-of-country merger, called corporate inversion, and are saying that it should be banned or heavily fined in some way. If that were the case it would ensure that large companies could not single-handedly be hurting our economy to such a relevant extent. The situation has become somewhat of a headline for candidates and both Hilary Clinton and Bernie Sanders have said that they plan to implement proposals that would prevent such deals from occurring again.

Many are saying that this calls for United States corporate taxes to be lowered so that this type of inversion will not even be an issue. Some others say that corporate taxation should be revised completely and that the government should reconsider the current plan. Though these are improbable, they are solutions that are being provided for those in control.

Assuming the merger is not halted or deemed invalid, it should be complete by the second half of 2016.

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One Response to Pfizer makes corporate inversion

  1. Carrie Celuch Reply

    March 8, 2017 at 9:53 pm

    Really good blog, thank you very much for your effort in writing this post.

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