Pfizer Inc. share price down, approaches Actavis with a takeover offer to move tax domicile overseas

According to people familiar with the situation, Actavis was approached for acquisition talks by Pfizer Inc in the US companys latest attempt to reduce its tax rate. The people close to the process, who asked not to be named, because the information is still private, shared that no formal negotiations between the two companies have been started yet and Pfizer has not made an offer.

The approach toward Actavis comes only a few months after Pfizer abandoned a $120-billion bid for British rival AstraZeneca Plc that would have allowed Pfizer to move its tax domicile abroad and reduce its US taxes.

The Wall Street Journal reported that, according to one of the people, Pfizer is offering Actavis a cash-and-stock deal. The person also said that the negotiations were discontinued last week after Actavis rejected the bid. The reasons why Actavis, currently valued at around $64 billion, denied the proposal still remain unclear.

The operational headquarters of Actavis are located in the U.S., but in 2013 the company made the decision of moving its tax domicile to Ireland after the acquisition of Warner Chilcott Plc in a similar tax inversion deal.

Pfizer has long been monitoring the pharmaceutical company as a vehicle to cuts its US tax rate and add a new product line. Actavis, on the other hand, expanded further in 2014 by purchasing Forest Laboratories Inc. at the price of $28 billion. This made the drug company large enough to be targeted as a vehicle for a tax domicile change under US law.

According to one person familiar with the talks, if the deal between Pfizer and Actavis was to be completed, Pfizer would have used cash held overseas to pay for the purchase.

Pfizer Inc. fell by 0.43% on Tuesday to close at $30.05 per share in New York, marking a one-year change of +4.34%. The company is valued at $190.54 billion. According to CNN Money, the 20 analysts offering 12-month price forecasts for Pfizer Inc. have a median target of $34.00, with a high estimate of $41.00 and a low estimate of $29.00. The median estimate represents a +13.14% increase from the last price of $30.05.