'Pfizergan' deal talks draw tax inversion opposition from Clinton, Trump

Pfizer and Allergan--which both confirmed on Thursday that they're in "friendly" deal talks--may be intrigued with the prospect of a tie-up. But politicians gung-ho about stopping tax inversions? Not so much.

Pfizer CEO Ian Read

Presidential candidates on both sides of the aisle have weighed in on the practice since the companies announced their discussions, Reuters reports. A spokesman for leading Democratic candidate Hillary Clinton told the news service she was "committed to cracking down" on inversions and "believes we should reform our tax code to encourage investment in the U.S., rather than shipping earnings and jobs overseas." Republican candidate Donald Trump said in a statement that "we need leadership in Washington to get the tax code changed so companies will be coming to America, not looking for ways to leave."

"These corporate inversions take capital and, more importantly, jobs offshore," he said.

Carl Icahn

According to activist investor Carl Icahn, who has launched a political action committee pushing for tax reform to eliminate inversions, a Pfizer-Allergan deal would see the 10th largest company in the U.S move abroad.

But the way Pfizer ($PFE) sees it, it needs such a move to keep up with its rivals. Several pharma companies have already shifted their domiciles to tax-advantaged countries in the past several years--including Valeant ($VRX), Mylan ($MYL) and Allergan ($AGN) itself.

"To be successful in the future, we need to have a competitive tax rate," CEO Ian Read said on Tuesday during the company's Q3 earnings call.

The company is well aware that changes in tax law could scuttle its plans, though--and that's why the time to act is now, Read said on the call.

"You'd rather do it in a Congress where you do know who are setting the rules and what the rules are," he told investors.

After all, a tightening of the rules on inversions has already spoiled one pharma merger. Last year, AbbVie ($ABBV) pulled the plug on its $55 billion agreement to buy Ireland's Shire ($SHPG), citing changes that had "introduced an unacceptable level of uncertainty to the transaction."

But while Pfizer may take flack at home, if talks are friendly, it's not likely to face the political pressure in Ireland that it ran into in the U.K. when trying to buy AstraZeneca ($AZN) last year. Allergan is "definitely a far easier target for Pfizer" than AZ was, GAM investment director Christophe Eggmann told Reuters.

Bernstein analysts, for their part, believe a deal is likely, they wrote in a note to clients. And the way they see it, "the biggest single obstacle is price."

- get more from Reuters
- read Pfizer's Q3 transcript

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