Ireland
is back at the centre of the controversy over corporate inversion as it emerged that drug giant
Pfizer
has approached Irish-headquartered
Actavis
to express its interest in an acquisition that could allow the US drug maker to move overseas and reduce taxes.
The approach emerged just a day after the Obama administration announced measures to curb such deals by making them less advantageous financially to US companies.
The Pfizer move raises the prospect that the efforts of the Obama administration to curtail such deals could fall short.
Pfizer made its approach before the US treasury department announced new rules to make such deals more difficult, people with knowledge of the matter said.
Those changes won’t deter Pfizer, even if they are a complication, one of the people said, asking not to be identified discussing private information.
AstraZeneca bid
Pfizer has failed in a previous effort to relocate its headquarters for tax reasons when a $114 billion approach to British drug group AstraZeneca was spurned. It had been thought that Pfizer might return to AstraZeneca when a lockout period expired.
Actavis became an Irish-based business just under a year ago when it completed its own corporate inversion through the $5 billion acquisition of Warner Chilcott.
While treasury secretary Jacob J Lew could take further steps, he steered clear of putting an end to a key benefit of inversions, which allow companies to lower their US earnings by shifting profits overseas using a technique known as earnings stripping.
While Pfizer isn't just looking to cut taxes – it's also seeking to bolster its product pipeline – chief executive officer Ian Read, has made no secret of his objections to US tax policy.
“There’s no substantial advantage to being a US company,” he said on a July conference call. “We are at a tremendous competitive disadvantage.”
Reed also said he's tired of criticism directed at companies and chief executives for doing what he says may be the best strategy to help shareholders.
Pfizer and Actavis aren’t currently in formal talks and Pfizer hasn’t made an offer, the people said.
Actavis shares rose 2.2 per cent in New York yesterday, giving the company has a market value of almost $65 billion. – Additional reporting: Bloomberg
