Pfizer-Allergan Mega Deal: More Inversions To Follow?

Many believe that Pfizer Inc’s plan to merge with Ireland based Allergan Plc shows the critical need for the overhaul of the US taxes. The Republican Chairman of the House subcommittee said that the corporate tax code in the United States is forcing companies to relocate to countries with more business friendly tax regimes. He added that more such tax inversion deals could become the norm if the government and the tax authorities do not take appropriate actions. It was early last week that Pfizer had announced that it would move its tax address to Ireland as part of a $160 billion combination with Allergan. It is imperative to state that if the deal does go through it would be the largest ever corporate tax inversion deal in the United States.

It was also reported today that three Boston based companies with significant investments in Allergan are bound to make hundreds of millions of dollars in the Irish drug maker’s merger with Pfizer. It is estimated that Boston based Wellington Management is set to make nearly $1 billion. It is important to state that the blockbuster deal announced just before Thanksgiving is valued at $363.63 per Allergan share, a price which the drug maker described as a 30 percent premium based on the unaffected share price before the announcement of the deal.

When looking at the charts for Pfizer Inc., the stock has been trending sideways since the announcement of the deal. The stock currently is facing stiff resistance at its 200 day moving average. The relative strength index for the stock has given a buy signal which is indicative of the buying interest at current levels. Traders believe the stock for Pfizer Inc. could head to levels of $35.5 if it were to close above the aforementioned resistance level.