Ian Read, chief executive of Pfizer, has been obsessed with finding a tax “inversion” deal for at least two years. He tried AstraZeneca but lost the takeover scrap in embarrassing fashion. Then, it is said, he tried to chat up GlaxoSmithKline but got nowhere. Now he’s landed on Allergan, the Botox firm that is the biggest Irish company you never realised was Irish.
After such a long and difficult search for a dance partner, you might assume Read would want to proclaim from the rooftops that he has finally found a way to reduce Pfizer’s tax bills and return overseas cash to shareholders without the US authorities taking a large bite. In fact, he buried the detail of the tax wheeze in the eighth paragraph of the “merger” announcement.
Shareholders had to wade through acres of guff about bringing together “two biopharma powerhouses to change lives for the better” before Pfizer got to the nub of it: “Pfizer anticipates that the combined company will have a pro forma adjusted effective tax rate of approximately 17%-18%.” That’s the logic of the deal – a previous 26% tax rate falls to 17%-18%.
Coyness is understandable since Read, in effect, is sending a “catch us if you can” message to the US lawmakers – and President Barack Obama – who regard tax inversions as “unpatriotic”. US legislators have tried to construct legal hurdles to deter inversions but Pfizer’s tax-planners obviously believe that, by structuring this agreement as a bid by Allergan, they’re in the clear. There is nothing, after all, to prevent foreign companies buying US companies, and it is apparently irrelevant that Allergan was itself created via an inversion deal in 2013.
But, while Pfizer may be able to rush this deal to completion before US legislators can react, it is surely nonsense to think US politicians will then shrug their shoulders and carry on as if nothing has happened. Pfizer is a company that, like most US pharma giants, has prospered for decades on the back of the high prices Americans pay for their prescription medicines. Read simply ignores that long relationship as he warbles on about gaining “a more competitive footing in our industry”.
The US presidential hopeful Hillary Clinton, already on the warpath on drug prices, won’t be so breezy, one suspects. Pfizer will be a company worth $360bn (£238bn) after consuming Allergan and thus presents a more substantive target than a former hedge fund manager whacking up the price of an obscure toxoplasmosis drug. There is an easy populistic line for Clinton to adopt with Pfizer: you don’t like our taxes, and we really don’t like your prices.
Perhaps the anticipation of battles ahead explains why Pfizer’s shareholders seem less than enthused about Read’s proposed injection of Botox. The share price, down since the deal was announced, hasn’t even managed a cosmetic improvement.
Playtech told to play fair
Is there a difference between betting on horses, cards or roulette, and betting on financial markets? In regulatory eyes, yes, as Playtech, the London-listed Israeli firm is finding out.
Playtech, big in online gambling software, has pulled its planned £460m takeover of Plus500, a firm that enables private punters to pretend they’re City professionals by trading contracts for difference and other fancy financial instruments. “Certain concerns” raised by the Financial Conduct Authority (FCA) could not be resolved by the end of the year, the deadline for completing the deal, said Playtech.
Nobody is prepared to explain those concerns but it is not hard to guess why the FCA might wish to probe any owner of Plus500 closely. Earlier this year, Plus500 was told to check the identity of all its customers after being found to have breached UK rules to prevent money-laundering.
Playtech, in theory, can try to find alternative financial betting companies to try to buy. Frankly, though, what’s the point? The Central Bank of Ireland has already opposed its acquisition of Ava Trade, a Dublin-based platform for trading currencies. That leaves Playtech’s financial business comprising just TradeFX, which is regulated out of Cyprus and thus does not provide a valuable passport to bigger markets. Best stick to sport and cards.
An unsound investment
When he accepted a £3,000 donation from Loudwater Investment Partners in 2013, Wes Streeting, now the recently elected Labour MP for Ilford North, could not have known he could end up as a member of the Treasury select committee in 2015.
But, now that he’s on the committee, the donation looks awkward. Loudwater is 5% controlled by William Stevenson, son of Lord Stevenson, former chairman of HBOS who was himself a director of Loudwater until 2012. The Treasury committee, of course, is now re-examining HBOS, and matters arising, after last week’s much-delayed report into the bank’s failure.
Streeting declared the donation properly and promptly, it should be said. And he can deal with any perceived conflict on interest in the standard way – draw attention to the donation before taking part in HBOS-related sessions – and that will be the end of the matter. All the same, do your research: even in 2013, a quick Google of Loudwater would have revealed the Stevenson link, which was probably best avoided even at the time.
