Drugmaker Pfizer (PFE) just threw a gauntlet down at Uncle Sam’s feet.
Market Roundup
The U.S. pharmaceutical giant said it would acquire Allergan PLC (AGN) in a transaction worth about $160 billion in stock, cash, and debt. The deal would combine drugs and vaccines that treat everything from cancer to arthritis to pneumonia, and the wrinkle-fighting treatment Botox and erectile dysfunction product Viagra, under one roof — creating the world’s largest Big Pharma firm.
Most importantly: The U.S. corporate icon would assume Allergan’s headquarters in Dublin, Ireland — slashing its tax rate to around 17% to 18% from 25%. The so-called “inversion” transaction flies directly in the face of Treasury Department regulations designed to prevent such deals.
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| The maker of Viagra plans to join the maker of Botox in what will challenge U.S. efforts to end “inversion” deals. |
In fact, Treasury just issued new and somewhat stricter guidelines last week. Treasury Secretary Jack Lew has spoken out against “tax-avoidance transactions,” while Pfizer CEO Ian Read has pushed back by slamming U.S. tax policy and elevated corporate tax rates.
So who will emerge victorious here? Investors believe Pfizer will succeed given the technical way in which the deal is organized. But that’s assuming Congress or the Treasury doesn’t get more aggressive with anti-inversion efforts.
If Pfizer can pull this off, it would be the largest pharmaceutical merger in history — eclipsing Pfizer’s own $116 billion purchase in 2000 of Warner-Lambert. The company is ultimately planning to split its operations into two business units, with one focused on selling generic drugs and one on newer, more expensive, patent-protected products. But that probably won’t happen until at least 2018, long after the expected 2016 closing date of the Allergan deal.
| “It would be the largest pharmaceutical merger in history.” |
As for the broader markets and the implications here, I’m watching the M&A business very closely. The ongoing rise in yields on higher-risk debt is driving the cost of deals up behind the scenes. If that trend continues, it will likely cool the ardor for mega-deals like this one … and that would be a market negative. So we’ll just have to see if Pfizer and its peers can keep pulling these kinds of transactions off.
So what do you think about this deal? Does Pfizer have a case when it comes to U.S. tax policy? Are corporate taxes too high here, and companies like Pfizer therefore justified in seeking out cheaper domiciles overseas? Or should the government put the kibosh on inversions before they drain the U.S. Treasury of needed tax revenue? You can add your take on this important debate below.
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Will Mario Draghi and his counterparts elsewhere be able to keep asset prices inflated despite fundamental challenges? Are low gas prices actually stimulating the economy, or are rising costs elsewhere devouring those savings at the pump? Those are a couple of the questions you were trying to answer online recently.
Reader Palmer L. said: “Remember the old and correct saying: Do not ever fight the Fed. Our stock market is sooooo controlled by the Plunge Protection Team it is pitiful.
“How could our market go up the light of current world events? Well, the answer is: The Fed cannot allow for it to fail. Keep positive with owning U.S. stocks, it is a Gimmie.”
But Reader Richard countered that: “Delaying the inevitable never works. The money-printing machine is slowly going to run out of ink, Super Mario in Europe is on the ropes, and the level of stress on Europe is coming to a pinnacle.
“The levels in the stock market are manipulated and not a true reflection of value. The recent bull market is running out of steam as the manipulation ideas to keep pumping the value will eventually run out: Mergers, super-mergers, QE, share buybacks, easy credit on cars, job sharing, minus-zero interest rates, zero-hours work contracts, the list goes on and on.”
Reader Dai also added: “Draghi is faced with the same systemic problems as we have in the U.S. when it comes to stimulus. The banks are a bottleneck! His efforts will lead to the same skewed asset bubble we see here in the U.S.: Top end properties, top end equities, etc. There is no manner by which they can force banks to advance credit in any manner that will be truly meaningful to the overall economy.”
As for savings at fill up time, Reader $1,000 Gold said: “A year or two ago, I put $80/week in my gas tank. Now it’s barely $40/week. Times two cars, that’s $80/week I’m saving. Can you imagine how many fill-ups at the gas pump there are each day in this country and how much extra money that is going into OUR economy, instead of the Saudis?”
But Reader Deerflyguy said we shouldn’t get over-exuberant about cheaper gas. His take: “Money saved at the pump doesn’t equate to excess funds to bolster the economy. Has anybody done any grocery shopping lately?
“Smaller quantities in the food containers, at higher prices, don’t allow for much discretionary spending of your fuel savings. Whatever you might have saved at the pumps, in a month, is easily eaten up at one sit-down family Sunday dinner.”
Thanks for sharing these comments. And if you didn’t take advantage of the Money and Markets website to do so yet, make sure you add yours to the discussion below.
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The pet supply retailer Petco Holdings will sell itself in a private transaction, rather than go public in an increasingly hostile IPO market. CVC Capital Partners and the Canada Pension Plan Investment Board are set to buy the company for around $4.5 billion from current owners, the private equity firms TPG and Leonard Green & Partners.
Belgian police and military conducted several raids and security operations in that country over the weekend and earlier today. Armed troops were deployed around the city of Brussels, while popular transportation services and shopping locations were all but shut down out of fear of more Paris-style attacks.
Saudi Arabia attempted a little verbal intervention to support oil prices this morning. But the pledge to work with non-OPEC and OPEC members to stabilize the market looks like just a repeat of what they’ve said before. No one has been able to pull together all the interested parties in the past year, so it’s doubtful they will be able to do so now.
More than $2 trillion of European government debt now yields less than zero, according to Bloomberg. That means investors are guaranteed to get less money back at maturity than they started with. Yet they’re buying anyway because they figure they can just sell to the European Central Bank after it cuts rates deeper into negative territory, or because they’re willing to pay a “safety premium” to own the stuff.
What do you think about buying an investment that’s guaranteed to lose you money? Or the latest effort by the Saudis to jawbone oil prices higher? Any thoughts on the ongoing terrorism threat in Europe? Let me hear about it online.
Until next time,
Mike Larson
P.S. Your chance to receive Larry Edelson’s new precious metals recommendations EXPIRES TODAY!
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Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
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INVERSIONS WILLHALT WHEN THE COMPANIES PRODUCTS WILL NO LONGER BE SOLD IN THE USA FOR 10 YEARS.
Maybe you can do without that little blue pill, Rick, but think of the hell a few million men would raise if it was denied to them. Not to mention all the other drugs that could mean life or death to millions.
not only are companies like pfizer skirting tax laws, they also walk the line on being a monopoly.
Da, just lower the corporate tax rate to 15% and companies from all over the world will be registering their corporate offices in the USA. Passing more laws to control commerce is the only tool that dictators have in their tool box.
Is TPP in effect yet? Under it, I understand a dispute, such as the one about Inversion, would go before an international tribunal of lawyers, and the U.S. would be bound by the decision. Pfizer might have a claim, because It would seem to be contrary to the terms of the treaty, to allow a government to rule over the legitimate business of a huge corporation. Ireland is not a party to the treaty, but both Pfizer and Allergan market in the countries of the treaty, so it would might be argued that the treaty would take precedence over U.S. courts. Wouldn’t the lawyers just LOVE to get their hands on such a case? Money, Money!!
There is no case here. There’s nothing illegal about what Pfizer is doing.
Nothing illegal yet. but gov’t is trying to make it so. I and just supposing that has happened before the merger.
Saudi Arabia? Isn’t that the country that orchestrated 9/11 in the blacked out 29 pages of the 9/11 report? Was that ruled by the man our president first bowed down to? And isn’t that the country that is working with our president to manipulate the oil business? It’s a topsey turvey world.
money flows to where it gets best treatment.
corporations sole duty is to its stockholders, not social or charities or patriotic.
usa should change laws to tax only income earned in usa, not world income for both individuals and companies, as do all other countries.
also, people need to understand that usa is country of choice for all non usa citizens
to hide money from their governments.
level playing field to solve problems.
You’re on the money Tom!
You raised an interesting question: “What do you think about buying an investment that’s guaranteed to lose you money?” I am VERY afraid that the government will eliminate cash and go to negative interest rates on bank deposits in the future. It will be forced “tribute” to an out-of-control entitlement society. But consider your question relative to having kids. Parents are absolutely guaranteed to lose “money” on the deal, but will surely (hopefully) derive a lot of “personal profit” on the arrangement (so it’s all good).
Gary, very astute. What if the government decided to do as you say and eliminate cash and at the same time pull a gold confiscation like they did in the 30’s?
I guess the next thing would be banning guns then would it be checkmate or WAR?
After all some in our government think it perfectly ok to give out money and pay the rent for those from inside and outside of our border just because they need it and not because they earn it.
Both corporate and individual tax laws need major reform. I hope that the Pfizer deal and any future ones go through. Perhaps that will provide the necessary kick in the ass for Congress to act. The idea that corporations have a “patriotic duty” to pay more taxes is absurd.
claritin, zyrtec, pepcid and many other drugs were once expensive prescription but are now cheap otc drugs. do you think maybe the drug companies are sticking it to us?
Any time that you feel a company is “sticking it to us”, just move to the other side of the equation, buy its’ stock!
i do, tommr. i not here to moralize, i’m here to make money.
Good luck with that!
Yes! It should be the other way around – government’s Patriotic Duty should be to lower taxes! We don’t need more public servants in this country, they just suck the life blood out of everyone, not just businesses.
The Left-Wing morons who run our govt. just don’t want to get it. These deals are increasing because we have the highest tax rates in the world. So why not lower them, stimulate the economy and simply remove the incentive for these international mega-deals duuuuuuuuuuuuuuuuuuh!”?
Same thing on the trillions of dollars U.S. corporations are holding overseas to avoid our extortionate taxes. Lower our taxes and give Big Business a one-time offer to bring it back here at a mere 15% tax rate (or lower). That would give the economy a huge shot in the arm, something the tax and spend Liberals haven’t a clue about. Running the printing presses non-stop is “pushing on a string” and it has never, repeat never worked!
Bruce is right, lower our corporate tax rate – problem solved -economy stimulated! Money will go to the best deal; so our government has less clout than they think they do.
Without high tax rates the politicians wouldn’t be able to sell loopholes to corporatioins. No corporations pay those high tax rates and some pay zero. How do you suppose that happens?
And it should be happening! How are you doing someone a favor by threaning to rob them and then saying “just kidding”. Psyc!!
ALL politicians are would be dictators. They all think they know better how to run your life than you do. The higher they go in government, the more they try to do so. That is as true for right wingers as for lefties.
Yes, politicians are sociopaths by definition!
After watching the recent news conferences in Turkey and Malaysia I am forced to conclude that the smartest man to every occupy the White House is little more than a fugitive from the faculty lounge. A complete idiot. Jim
Stupid politicians. Just lower the corporate rates to be competative with foreign rates and there will be no such occurances. Do they not realize that jobs will be lost with corresponding loss of employee, manufacturing and other tax revenue. The ripple effect will be disasterous; far exceeding the loss from lower corporate tax rates. Is there any wonder that politicians are so disliked to the point of hatred!!!!
if pfizer doesn’t wants to cheat and not pay taxes, we don’t have to honor their patents. any chemical company can make these pills for pennies on the dollar. most of what pfizer makes is nothing special.
I don’t know enough about the process to form an opinion. One thing I do know: We have the best politicians and bureaucrats money can buy. They will make a lot of noise along the way like a plane revving up before takeoff. Expect Pfizer to fly.
WOW Jake, some statement,best politicians and bureas money can buy.Look out for guys in white jackets turning up to your door.
More like black bulletproofs with lots of guns.
looks like the troll has jump from larry edelson’s blog to mike larson’s. it was just a matter of time, eh tommr?
I’m not on Larry Edelson’s blog, but I am really feed up today with these totally ignorant comments! Sorry, it’s just a bad mood that I’m in!
maybe you’re the idiot.
Every Tax dollar saved by Pfitzer is a Tax dollar that must be paid by the American people.
The exorbitant prices of their drugs shows just what they think about Americans.
The battle of Corporate profits vs Nationalism has been hit again.
you sound like bfd, heide, and friends, tommr.
Lower corporate tax rates to 10% and eliminate ALL tax loopholes that are used to get around paying any money at all, i.e. like Verizon and G.E. to name a few. Then charge hefty penalties to any company that tries the inversion tactic.
RJ is correct…major, major tax reform is long overdue, individual and corporate.
Maybe our new Speaker of the House can work his magic and get a dysfunctional
Congress to do the people’s business. Corporations have a responsibility to their
consumers and stockholders; certainly NOT a duty, patriotic or otherwise, to pay more
taxes!
no company shouldn’t be allowed to avoid paying taxes just because they change their mailing address.
You don’t seem to know what a double negative is, $1000 gold! Really bad grammer!
you ain’t lying. can’t spell either.
i mean, can’t spell neither.
actually, i just can’t type.
I am tired of companies making all their money in the USA and not wanting to pay taxes. The corporate tax rate seems high but corporations don’t pay those rates thanks to all kind of credits and other tax dodges given to them by a Congress that has been bought.
Your statement about sums it up, Vic.
In addition, I have LONG been fantasizing about mandating Congress into a forced session that will run for however long it takes for them to come up with a comprehensive tax reform proposal. Priority one will be that it must work to the benefit of the USA and her citizens while, at the same time, laying the groundwork for providing a competitive tax structure for businesses. Oh, and at the same time, the Supreme Court will get a bit of a, “straight talk” about rethinking their decision that corporations are people. Probably one of the most outrageous decisions ever made by our supposed best and brightest judicial minds.
Please do not waste more tax dollars. The only mandate should be to reduce the number of politicians. Not everything can be written into law, business will always find a way around it, why Doyle you think they have their own school of lawyers?
If history is any presidency, business always outsmarts government taxes, not the other way around – even in modern day communist China! Wake up and smell the roses.
All taxes are theft! Everyone’s fair share of taxes is zero!
You’re absolutely correct, Millard! All these people who talk about a “fair share of taxes” are idiots! There is no “fair share” of anything outside of Communtist Counrties!!
To a politician, your fair share is 100%. That is what it would be if we let them get away with it.
One of the rallying cries of our founding fathers was “No taxation without representation!”
How many of us citizens feel that our views (not to mention our well-being) are truly being represented on any level of the current government??
I certainly don’t….and the bills going before the house and senate that might make sense are so full of junk riding piggyback, it’s pathetic!!
I’m a terrible citizen. After the way the government has treated me over the last forty years it gives me great pleasure to see someone, anyone, screw the Federal Government. They steal and waste the majority of what they take from us. I’m about ready to move to
Ireland myself. Jim
I completely agree with Pfizer’s chairman, Ian Reed. America has the highest corporate tax rate of any major nation. It should be reduced. Or better yet, eliminated, along with all other income taxation, and replaced with the Fair Tax.
There is no such thing as a “fair tax”! This is an oxymoron! No tax is fair. It’s all theft and extortion and, for you religious types, a violation of the TENTH COMMANDMENT!!
“America” — i.e. the USA — has the highest and most unaffordable drugs of any nation on earth, also. It also has the highest cost of health-care per capita in the world. And the health-care system requires more paper-pushing and more employees than anywhere else, also. Just take a look at Canada by comparison: Drugs very low-cost in general, healthcare available to all citizens. Infinitely less paper-work and bureaucracy. And the statistics ranking health standards and longevity — far ahead of those in the USA. Taxes easy to do, not everyone looking for loopholes because there aren’t many — do them in a couple hours yourself.
If what’s good for stockholders isn’t good for the populace in general, then there’s constant conflict and game-playing. Huge profits for legal drug-dealers are simply the way to privation and misery for consumers. We all pay for those profits somehow, unless we have stocks in the company and those stocks do well. “No tax” is just anarchy. “Corporations” is a term that refers to a collective set of people; they are not “people” per se. They need to pay a fair share for the economy as a whole to profit. It’s great to profit, but the “corporations are people” line has it all backwards.
The ability for us to profit, by intelligent investment, is the hallmark of the USA’s prosperity. I am not a “leftist,” but I’ve traveled a lot abroad, and there are many problems at home that we just don’t recognize. I even spent some time in the USSR, and that was very different from what we were taught to believe in America. I wouldn’t want to live with it, but the lives of everyone had got better over some years. Having a state-subsidized apartment, for instance, is a hell of a lot better than being homeless.
I think if we want to maintain the ability of most Americans to aspire to and attain wealth, we have to be responsible to the whole society as well. The “gap” between rich and poor has been widening, as most of us observe, and not enabling what was “the middle class” to prosper will ruin “the American dream.” So I support wealth and corporations and whatever else is decent that brings us wealth, but we can’t afford to “trash” “the government” and just complain about taxes all the time.
Overall, I say “If the government doesn’t work, we need to make it work,” for all of us — individuals on fixed incomes, billionaires, and everyone in between. If you want to see what “no government” is like, visit Mexico or Haiti, and think again.
I’m going to shut up and let tommyr do my talking for me. He’s hard but he’s right! Jim
One of my supposedly educated liberal friends said “why is Pfiser leaving for only 7% extra in taxes.I told him It’s almost 50%.He had to think about it for a while.
Wouldn’t it be better to tax these guys at a competitive 17-18% instead of no tax revenue and a loss of high paid jobs and losing more tax money??
That’s what you get when academics make financial decisions.
Does anyone know whether shareholders’ profits will be taxed because of the transaction. When KMP and KMI were merged, I, as owner of KMP, was taxed on a substantial profit although I had not actually sold KMP and received no proceeds. I still am smarting (or, perhaps, more accurately, stupiding) over the large tax bill…….
lets hope it will help ever one .
Buy bonds at negative rates? Those folks are stupid and deserve to lose $$. If it happens here, no more bonds for me and I’ll close my bank account.
Bonds at negative rates will resell at much lower prices, if you need the money in some emergency. Another reason not to buy them.
What are you really doing when you tax a co-operation ? Is a co-operation nothing more than people working under one name to produce a product? So when you tax a co-operation you are taxing all the “people” that work for or invest in the co-operation.
Stop all the taxing of co-operation and then the “people” will have more money to be taxed, and will use that extra money to make more money so the tax base will grow.
Check out the countries with the most freedom to spend there money and you will find a prosperous nation.
The founders of our country envisioned a country where citizens were responsible for there own commerce, to spend there money as they liked, where they liked to get the best deal they thought possible.
Companies or individuals going off shore are only doing so for the best interest of the “people” involved.
Any company or any of its subsidiaries should not be allow to lobby or contribute to any of our politicians or their trusts. Another incentive to stay in the US.
There is no point in having a “bank account” now except for your conveniance. They don’t pay ANY interest.
When I started my business in the seventies the only investing I did was to collect four percent on my bank account. I bet they soon start charging us to put our money there. We wouldn’t want to encourage the nasty capitalist habit of saving. Spend, spend, spend! Jim
more like invest, not spend, jim. utilities like ameren are paying about a 4% dividend, their stock is doing well, and it’s very unlikely to go out of business.
not to mention the tax advantages of dividends and long-term capital gains vs interest income on a bank account.
Depends on your tolerance for risk. If there was no such thing as bankruptcy and capital losses I would agree. I bet if I had taken advantage of the miracle of compounding for forty years I would have more than I have made “investing”. Interest isn’t rigged, the Market is. Jim
Also, solar could render electric utility monopolies obsolete overnight. Nothing is “safe”. Jim
I’m also a lousy investor, I have made a lot of money and lost a lot of money in the
Stock Market. I have discovered the secret though. If I buy 100 shares it goes up. If I buy 1,000 shares it goes down. Jim
When will the justice sop all these anti-trust violations the healthcare industry has been the biggest offender of destroying competition which results in high consumer costs to all of us.
And to Denise, those invested in bonds are not necessarily stupid. When a company goes bankrupt, the holders of the bonds are the first to be paid and the stockholders lose everything.
I been in bonds and securities for over thirty years and doing very well.
Bill
I view it as unamerican. Will try to avoid buying their products.
Taxes are simply a social engineering tool. The Government already owns half the country. They also have a printing press. Jim
were. where are you were? calling were. the troll is back. don’t feed the trolls.
Well, since we live in a corporatocracy, where the Fortune 100 to 150 control just about everything in the western world, including the government politicians, nobody should be surprised that the next financial engineering gimmick dujour are inversions, that are designed to make the mega-multinational corporations bigger AND avoid taxes..what more could a global multi-national CEO want!!! And you know these guys all talk etc…in their private meetings etc..Barring a miracle, it would be hard to see how the “minion” government political cronies would stand up in any meaningful way to this deal. After all who controls the government?? That’s right, the multinational CEOs…
That’s why they call it crony capitalism. It’s actually a form of Fascism. Jim
Damn right Pfizer has a case. If this president and this Congress are not willing to change tax laws to make this country more competitive with other major countries, then this will continue to be the inevitable result. I’m amazed we haven’t seen more of these.
who cares about pfizer????????????????????????????????????????
we’re at full employment.
inflation is starting to its uptick.
and we’re talking about pfizer??????????????????????????????????
Damn right we need to talk about Pfizer. If the would be dictator politicians somehow prevent the company from moving to Ireland, for whatever reason they may have, property rights are no more for anyone. The government is then free to tell you what you can do with anything you have paid for with your hard earned cash. Come to think of it, they already do that with zoning rules – for your own benefit, of course.
You’re right, no one cares about Pfizer, but everyone cares about TAXES – I think that’s the real topic discussed here.
what do you think tommr?
I already said enough (not that I couldn’t say a lot more) — got my comment out of order in these posts. Just one more thought: If we are angry with our government, it is up to US to change it.
Just what makes anyone think that US has enough money to affect any change in the government? When you add the votes of those receiving ‘entitlements’ to the votes of government employees and their families, they will out number those who want change plus those who won’t even vote!
As I scrolled up to the top to look over what Mike Larson’s comments were (lost track of them as ideas go on and on), I do think his concerns about the terrorism are tremendously important. This sort of terrorism isn’t going to stay in Europe or abroad. It could break out here (again, as if 9/11 wasn’t enough?), and I worry that in trying to stop it from breaking out, we could become a “police state.” We could suffer many hardships for a long time if we become too frantic. It’s not even just ISIS — it is a global problem, but the USA is hardly free from being considered a key target. The whole thing is very depressing to contemplate.
The USA needs to wake up and reduce the Corp .tax before its to late!!
ALL taxes, for that matter.
this is just another confirmation on how out of touch the politicians are. They are so wrapped up in spending they don’t care how or where they get the money. They have driven the tax rate up and up till it has come to the point that not just individuals but also large corporations are trying their best to get the over burdening taxes down.
Dollars taken by govt are generally wasted.Better to keep Dollars in the hands of the private sector,individuals and corporations,with leaders much smarter than govt politicians.A tax rate of 17-18% is still too high.Hopefully,more companies will do inversions,keeping less money out of the hands of govt,allowing companies to provide us more products at lower prices.
True experience is the best teacher
Thank you for cooperation
So the Turks shoot down a Russian fighter, and call on NATO to support them. Putin hasn’t answered yet, but we all wonder what he will do – and suspect the worst. You notice, gold has moved up a little this morning, possibly right on Larry’s schedule of a bottom this week.
Congress suspended the limit on the national debt just last month. Since Oct 30, the debt has already increased by some $550 Billion. Over half a trillion bucks in less than a month. We elected these idiots. We will soon have the chance to elect a new batch of idiots. Donald Trump apparently believes in the methods of that NAZI propagandist, Joseph Goebbels: a lie repeated often enough comes to be accepted as truth. Not only does he repeat his tale of watching New Jerseyites cheer the fall of the World Trade Center, he even erected a monument on a golf course he owns in Virginia, to a Civil War battle that never happened. He insists it did.