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Pfizer Calls Off $150 Billion Merger With Allergan


Remember that big merger involving Pfizer? The giant pharmaceutical company said it was joining forces with Allergan, a company based in Ireland. The plan last year was to move Pfizer's headquarters to Ireland and therefore pay a lot less in taxes than in the United States. Remember that? Well, now that you remember it, forget it. Pfizer dropped the deal this morning after President Obama's administration made it less attractive. NPR's Jim Zarroli has been covering the story. He is in New York. Jim, good morning.

JIM ZARROLI, BYLINE: Good morning.

INSKEEP: What happened?

ZARROLI: Well, Pfizer just issued a statement a little while ago basically saying its board had agreed to end the merger and that it was because of the steps taken by the Treasury Department on Monday. You know, it said it had hoped that this deal would go through. It would have made the company more competitive. But it would go ahead with other plans now. I mean, this was kind of inevitable because Allergan's stock was down really sharply yesterday. I mean, most investors had already concluded that the deal wouldn't go through because of the new Treasury Department rules.

INSKEEP: What did the Treasury Department do exactly?

ZARROLI: Well, the - you have to keep in mind what an inversion is. It's a kind of a corporate tax dodge.


ZARROLI: And the administration took some steps to make them harder by tightening the rules. I mean, for instance, there are rules saying if an inversion takes place the foreign partner has to be of a certain size. The new rules say that essentially the size can't be measured by taking into account recent acquisitions. It's a bit technical. But it affected the Pfizer-Allergan directly. In fact, some people almost thought that, you know, it seemed - the new rules seemed designed to stop that particular merger, which was the biggest merger last year.

INSKEEP: And I guess you have some tape from President Obama here. Let's give a listen to some of this.


PRESIDENT BARACK OBAMA: So I am very pleased that the Treasury Department has taken new action to prevent more corporations from taking advantage of one of the most insidious tax loopholes out there and fleeing the country just to get out of paying their taxes. This got some attention in the business press yesterday. But I wanted to make sure that we highlighted the importance of Treasury's action and why it did what it did.

ZARROLI: Yeah. I mean, you have to keep in mind, again, what an inversion is. It's when a U.S. company goes to a - merges with a company in a foreign country where the taxes are lower so it can take advantage of the lower tax rate. Now, critics say these things are happening more and more because the U.S. corporate tax rate is higher than it is in other countries - at least on paper. I mean, it's a very controversial issue. Other people would say U.S. companies have lots of ways of paring down their tax bill and most of them do.

INSKEEP: So there's a question about how big a deal this really is for companies, but nevertheless they have done this. And it's interesting to note, Jim Zarroli, that this has become part of the political discussion - hasn't it? I mean, we have a presidential campaign in which Donald Trump is saying the U.S. is getting shafted. You have got Bernie Sanders saying in his own way that the United States is being taken advantage of by corporations. This did not come - this proposed merger did not come at a particularly ideal time politically - did it?

ZARROLI: No, and I think that may be part of the timing. I mean, the Democratic candidates, especially Bernie Sanders, have talked about this a lot. Hillary Clinton has. The Republicans maybe less so. But clearly inversions are really unpopular politically. People see this as unpatriotic. They don't like it. And I think, you know, all politicians at this point are reluctant to come out and seem to be defending them. I mean, President Obama has sort of couched this as an issue of patriotism. And it's been hard to campaign against that.

INSKEEP: Jim, thanks very much as always.

ZARROLI: You're welcome.

INSKEEP: That's NPR's Jim Zarroli reporting this morning after Pfizer dropped its plans to merge with Allergan. Transcript provided by NPR, Copyright NPR.

Jim Zarroli is an NPR correspondent based in New York. He covers economics and business news.