Allergan's ($AGN) $160 billion inversion merger with Pfizer ($PFE) and its attendant whacking of U.S. taxes has raised some hackles in Washington. Now, Allergan seems to be offering a bit of sugar to make the tax-avoiding medicine go down by talking about doubling employment at its flagship plant in Texas.
|Allergan CEO Brent Saunders|
Allergan CEO Brent Saunders suggested big things for the plant in Waco during a visit there Friday, the Waco Tribune-Herald reports. He pointed to the economic impact its flagship facility has had on central Texas and suggested there could be a "possible doubling of capacity" that would mean adding several hundred jobs. The 400,000-square-foot plant, which already is adding capacity, currently employs about 750 people.
Saunders cited a Baylor University study, which a company press release says estimates the plant's aggregate economic impact at $450 million for the region this year.
In a note to investors, Bernstein analyst Ronny Gal said the flagging of the Baylor study is likely a "reminder for Congress that taxes are not the only benefit they provide and maybe silently hinting that without (the Pfizer) deal other measures may need to be taken."
The Baylor study also said that the Waco plant is projected to pay $3.84 million in local property taxes in 2016. Of course, that is a paltry amount compared with the loss of the taxes in the total U.S. economy if the deal is completed and Pfizer takes on the Dublin, Ireland, domicile that Allergan got through an earlier inversion. The company has said that its tax rate would drop to about 18% from about 25% now.
Pfizer is doing what any number of other companies, including a host of drugmakers, have done to reduce their tax load. But the series of announcements these last few years led President Obama to call the inversions unpatriotic. The Pfizer and Allergan deal drew specific criticism from both Republican hopeful Donald Trump, who called the move "disgusting," and Democratic front runner Hillary Clinton who said the U.S. needs to crack down on the tax-eroding deals.
In fact, the U.S. Treasury has been trying just that. It has twice since 2014 made tax rule revisions in hopes of discouraging the moves, but it would take an act of Congress to stop them. The tax rules changes have dissuaded some companies from moving forward with inversions but don't "seem to materially impact" the Pfizer-Allergan hook-up, Bernstein analyst Tim Anderson wrote in a note to clients.
|Pfizer CEO Ian Read|
Pfizer CEO Ian Read has reportedly made phone calls to lawmakers and Obama administration officials to explain how the Allergan merger will give the drugmaker access to more cash that it can invest in the U.S., investments that should mean more jobs in the U.S.
The newspaper asked if an expansion at Waco would occur with or without the merger, and a Pfizer spokesperson told the newspaper: "The proposed combination of Pfizer and Allergan will create a leading global pharmaceutical company with the strength to research, discover and deliver more medicines and therapies to more people around the world."
- read the WacoTrib.com story
- here's the Allergan release