After Astra Zeneca also deemed Pfizer's latest offer of 106 billion dollars "unsuitable", the hypothesis that the American drugmaker is addressing shareholders directly with the launch of a hostile takeover bid is becoming more and more concrete. The latter hypothesis is not denied by the CEO, Ian Read.
In short, everything is still uncertain. Certainly, at the moment, there is only one who will lose out if the deal goes through: the US Treasury. Swinging London – The project, in fact, envisages setting up the headquarters of the new holding company controlled by Pfizer in the City of London, thus exploiting the benefits of the British tax regime. First of all, a corporate tax rate of 21% (expected to drop to 20% in 2015), almost 15 percentage points lower than the American rate.
In addition, for those running global businesses, the UK offers another clear competitive advantage. In fact, it is possible to declare to His Majesty's tax authorities only the incomes that have been produced on Anglo-Saxon territory. An ideal shield for those who, like Pfizer, register billions of dollars worldwide and are subject to a tax of 35% upon return to American territory (the American agency only grants a tax credit relating to the amount previously paid to the foreign state).
Patent Dream Box – The proactive British tax system has also confirmed that starting from 2017 there will be a particular tax relief relating to Research and Development expenses (the Patent Box Tax). This facilitation establishes that all revenues deriving from patents filed in the United Kingdom are taxed at 10%. A very strong attraction for companies where the major investments concern R&D.
Perception of Astra – The Astra board itself expressed reservations about Pfizer's real strategic and long-term interest in the acquisition. A judgment in contrast with the majority of shareholders and part of the political world who instead welcome a closing under such conditions. At the moment, the American company holds about 70 billion dollars allocated outside the American borders. Therefore, if the choice were to fall between a return of capital to American territory (thus targets of the long arm of the IRS), or an acquisition that is not purely strategic but with significant tax advantages, this second hypothesis would undoubtedly be the most attractive. This is probably what the Astra board itself thought, and therefore held back, considering the resources and people employed in the company at risk.
Pfizer is not alone – The operation structured by Pfizer fully reflects the American tax avoidance mechanism known as “tax inversion”. Pfizer itself is in excellent company, as several companies have set up similar M&A mechanisms in recent years. In the pharmaceutical field, we recall the recent purchase of Biovail by Valeant with the relative transfer of the headquarters to Canadian territory. Also one of the most important operations of recent years, the acquisition of Publicis by Omnicom, resulted in the placement of the new registered office in the Netherlands. Remaining on British territory, Liberty Global US itself (cable systems) predictably kept its headquarters in London when it acquired Virgin Media. Caterpillar, on the other hand, has chosen green Switzerland and its taxation of less than 10% as the headquarters of its subsidiary dedicated to the worldwide management of spare parts.
All important operations, surpassed in terms of value by the possible agreement between Pfizer - Astra. Precisely for this reason the US is clamoring for a regulatory brake to stem this haemorrhage of resources abroad. Even at the cost of questioning the liberalism and anti-dirigisme typical of American thought. However, the sensation is that, having not yet digested the famous Double Irish Sandwich, we have already moved on to the Tax Inversion Dessert. Sorry guys, but it's really true: the whole world is country.
