The U.S. Treasury's latest stab at deflecting tax inversions deals has persuaded at least one player to give up plans for a move to Ireland, but not from looking outside the U.S. for some tax relief. Pozen ($POZN), which was headed to Ireland as part of its merger plans with Tribute Pharmaceuticals, will set up shop instead in Tribute's home turf of Canada.
The two drugmakers said recently they charted the change of course "after reviewing the recent guidance from the U.S. Treasury's Notice 2015-79 issued on November 19, 2015 and its potential impact on the proposed transaction." The U.S. Treasury had quickly issued the revisions after reports surfaced that Pfizer ($PFE) and Allergan ($AGN) were about to do a $160 billion deal that included having an Irish domicile to dodge the U.S. corporate tax bite.
Monday Pozen and Tribute recommitted to their merger but said that they will go to Canada instead. They have canceled meetings for Wednesday and Thursday when the original deal was to go to shareholders for a vote. The two companies are rewriting their proxy material and hope to get everything wrapped up in the first quarter of next year. The new company, which will be renamed Aralez Pharmaceuticals, has a $350 million commitment from a syndicate led by private equity firm Deerfield Investments.
In explaining the change of course, the two said, "With planned business operations in Ireland, Canada and the United States, the Canadian domicile offers a substantially similar corporate and tax structure to the previous Irish domicile, and will benefit from Tribute's business foundation and strong presence in Canada where Tribute is incorporated and from where it has always operated."Pozen CEO Adrian Adams
For Chapel Hill, NC-based Pozen, the news is more of the roller coaster ride the company has been on for a couple of years. It lost Sanofi ($SNY) as a partner on its projects to make a more stomach tolerable aspirin after the FDA twice issued Complete Response Letters to Pozen over concerns with Pozen's API supplier. Then in June it announced CEO John Plachetka would be replaced by Adrian Adams, CEO at Auxilium until that company was sold off to Endo ($ENDP) in January. Adams brought along Auxilium colleague Andrew Koven to be president. It also said it had set up an Irish subsidiary. Those moves led some observers to think it was prepping itself for a sale. A week later, Pozen laid out its original plan for a $144 million merger with Tribute Pharmaceuticals Canada and their intention to move to Ireland.
But then talk of the so-called "Pfizergan" deal leaked out, with their plans to do a tax inversion deal by establishing a home base in Ireland despite tax rule changes a year ago aimed at making inversions less attractive. Treasury last month rushed again to clamp down.
While the most recent revisions were enough to dissuade Pozen from going overseas, it so far has not stopped Pfizer and Allergan. Four days after Treasury acted, those two announced their $160 billion deal, a reverse merger with the smaller Allergan buying Pfizer to ensure the improved tax rate. Evercore ISI figured the move would tamp Pfizer's tax rate, which it believed to be the highest in pharma at 25%, to between 17% to 18% within a year after the deal's close. It has been estimated that will cut the tax bill by about $1 billion a year.
- read Monday's announcement
- here's an earlier one