Shares in Dublin-based pharmaceutical company Allergan have slumped by almost 20 per cent in after-hours trading, after the US Treasury said it was taking steps to curb so-called 'inversion deals' in which US firms reincorporate overseas following an acquisition.
Allergan has agreed to be bought by Pfizer in a $160bn (£112bn) deal that would see Pfizer move its headquarters to Ireland. While the Treasury's attempts to clamp down on inversion deals were announced last year it did not block the deal - with some onlookers speculating that the two pharma firms would not be caught up in the new rules.
However, the US Treasury has announced that it would be making it more difficult for companies to invert by putting a three-year limit on foreign companies stocking up on American assets to avoid ownership requirements for a later inversions deal.
"For years, companies have been taking advantage of a system that allows them to move their tax residences overseas to avoid U.S. taxes without making significant changes in their business operations," said Treasury secretary Jacob J. Lew.
"After an inversion, many of these companies continue to take advantage of the benefits of being based in the United States – including our rule of law, skilled workforce, infrastructure, and research, and development capabilities – all while shifting a greater tax burden to other businesses and American families."
Lew added that the Treasury has taken action twice already to make it harder for companies to invert and reduce the economic benefits of doing so.
"These prior actions had a real impact and have helped slow the pace of these transactions," he continued.
"Today, we are taking further action to make it more difficult to invert. Some companies are serial inverters. They acquire multiple US firms in stock-based transactions over a short period of time. This increases their size and reduces the negative tax consequences of a subsequent inversion. Today’s action takes away a significant amount of the tax benefits of these serial inversions."