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Bankers risk losing millions if Pfizer-Allergan deal falls apart

Wednesday, April 6, 2016 - 07:18

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After putting together the biggest transaction in a record year for deals, advisers on Pfizer Inc's $160 billion merger with Allergan Plc may be about to watch millions of dollars in fees evaporate.

[NEW YORK] After putting together the biggest transaction in a record year for deals, advisers on Pfizer Inc's $160 billion merger with Allergan Plc may be about to watch millions of dollars in fees evaporate.

The deal could be in jeopardy after the US took tougher steps this week to limit corporate inversions, where a company adopts a foreign address to cut its tax bill.

New York-based Pfizer structured the deal to take advantage of Allergan's Dublin headquarters where the corporate tax rate is more favorable.

At stake for advisers is an estimated US$350 million, according to previous estimates from consultants Freeman & Co.

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Pfizer was expected to pay US$120 million to US$150 million in fees while Allergan's bankers would split US$160 million to US$200 million.

Goldman Sachs Group Inc, Centerview Partners, Guggenheim Partners and Moelis & Co worked for Pfizer. Allergan was advised by JPMorgan Chase & Co and Morgan Stanley.

The loss of this deal could be particularly harmful for smaller investment banks, which had gained standing in M&A league tables after working on a mega-deal. 

Moelis fell 4.4 per cent at 1:56 pm in New York Stock Exchange trading. Allergan-Pfizer had helped Moelis jump to 13th place in merger-advisory league tables in 2015, up from 27th in 2014, according to data compiled by Bloomberg.

Closely held Guggenheim rose 32 spots to end 2015 in 12th and Centerview moved up two spots to 10th.

The Treasury Department said the rules would limit companies' ability to participate in inversion transactions if they've already done them in the past 36 months.Allergan has been involved in several mergers in that timeframe.

Pfizer and Allergan said Monday that they would review the Treasury Department's announcement, declining to comment further on the potential impact to their agreement.

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