US pharma firm scraps inversion in Ireland
Published 11/12/2015 | 02:30
US pharma company Pozen has scrapped its plans to move its headquarters to Ireland after reviewing new efforts by the US Treasury designed to combat tax inversions.
The firm announced in June that it intended to move its headquarters to Ireland after acquiring Canadian Tribute Pharmaceuticals in a deal worth about $144m.
As part of the transaction, a group of investors, including healthcare investment firm Deerfield Management and Canadian biotech company QLT, were to invest up to $350m in growth capital for the combined business, which is to be called Aralez Pharmaceuticals.
However, Pozen said it has decided to move its headquarters to Canada instead of Ireland.
Canada's central government corporate rate is 15pc compared to Ireland's 12.5pc, although this rises to about 26pc when provincial corporate tax rates are included.
Pozen said in November that the companies had "reviewed the recent guidance from the US Treasury's Notice 2015-79 issued on November 19, 2015, and its potential impact on the proposed transaction."
The notice referenced is a series of new rules introduced by the US Treasury in an effort to stop inversions, where a company moves its legal domicile to a lower-tax nation but retains the bulk of its operations in its higher-taxed country of origin.
It introduced a number of measures aimed to combat inversions, one of which is aimed at preventing the "stuffing" of companies.
Previously, an inversion could go ahead if a US company's shareholders owned less than 80pc of the combined company. The measures aim to stop the practise where the non-US firm is made artificially larger before a merger to meet the 8pc threshold rule.
After the rules were published Pozen said the two companies were "considering a Canadian domicile". In its statement announcing the move to Canada instead of Ireland, Pozen said the Canadian domicile "offers a substantially similar corporate and tax structure to the previous Irish domicile".
When questioned about the decision, a spokeswoman for Pozen said: "We continue to maintain a presence in Ireland through an operating company that holds intellectual property and from which Aralez plans to execute its acquisition strategy."
Inversions have become an increasingly hot topic in the US. Figures on both sides of the political spectrum condemned the recently announced $160bn merger between US company Pfizer and Irish firm Allergan, which will see the New York-based firm move its headquarters to Ireland.
On Wednesday Democratic presidential candidate Hillary Clinton unveiled a raft of measures aimed at eliminating US inversions.