Pfizer, Allergan agree to end $160B merger after tax crackdown

Pharmaceutical giant Pfizer announced Wednesday that it has terminated its planned $160 billion merger with Ireland-based Allergan after the Treasury Department took new action to crack down on U.S. companies moving their headquarters overseas to lower their taxes.

{mosads}“The decision was driven by the actions announced by the U.S. Department of Treasury on April 4, 2016, which the companies concluded qualified as an ‘Adverse Tax Law Change’ under the merger agreement,” Pfizer stated in a statement.

Pfizer and Allergan mutually agreed to terminate the merger agreement, and Pfizer has agreed to pay Allergan $150 million to reimburse transaction-related expenses, the company added.

The Treasury Department on Monday announced new guidance to curb corporate inversions, or transactions in which U.S. companies reincorporate overseas for tax purposes after merging with foreign companies.

One part of the guidance would limit the tax benefits of serial inversions. This was seen to be particularly damaging to the Pfizer-Allergan deal, since Allergan has been involved in several inversions and mergers in recent years. Allergan’s stock has fallen since Treasury announced its new actions.

White House press secretary Josh Earnest said Tuesday that while Treasury’s guidance was not focused on a specific transaction, the administration wouldn’t be upset if inversion deals didn’t go through.

President Obama said on Tuesday that tax loopholes like inversions make it “harder to invest in the things that are going to keep America’s economy going strong for future generations.”

Democratic presidential candidates and lawmakers were pleased with Treasury’s actions and called on Congress to take additional steps.

But leading Republican tax writers have expressed concerns that the guidance will hurt investment in the United States.

This report was updated at 8:29 a.m.