WASHINGTON, April 6 (UPI) -- Pharmaceutical companies Pfizer and Allergan have abandoned a $152 billion merger due to U.S. government actions attempting to close a tax loophole known as corporate inversions.
Pfizer confirmed the merger had been terminated Wednesday morning. Pfizer will pay Allergan a $400 million break fee as per the merger agreement, CNBC reported.
The move follows new rules imposed by the Department of Treasury and President Barack Obama's call to Congress to end the tax loophole permanently.
The Treasury's move, announced Monday in conjunction with the Internal Revenue Service, is aimed at U.S. companies that buy foreign companies in order to move U.S. assets overseas and reduce the taxes they pay to the U.S government. The new rule would apply to any inversion attempt after Monday, and retroactively to pharmaceutical manufacturer Pfizer's acquisition of Allergan in 2015. Allergan, the maker of Botox, is based in Ireland.
This is the third effort by the Treasury Department in recent years to stop American companies from merging with foreign companies to avoid paying U.S. taxes.
On Tuesday, Obama said best way to close the loophole is through tax reform -- an act that requires the work of Congress, which is presently controlled by Republicans.
Ed Adamczyk and Doug G. Ware contributed to this report.
