Allergan shares are on track to open sharply lower Tuesday after the U.S. Treasury announced new policies that threaten Pfizer’s takeover of the Ireland-based Botox maker.
The pending $ 160 billion merger between Pfizer ( and )Allergan ( is the second-biggest takeover deal of all time, according to Dealogic. )
The massive deal, announced in November, would see New York-based Pfizer shift its headquarters to Ireland, a move that could reduce its tax bill. The structure is emblematic of the “tax inversion” deals that have become popular in recent years.
Treasury rules announced Monday will clamp down on companies that try to reduce their tax bills by merging with foreign firms.
Pfizer and Allergan issued a joint statement on Monday saying they were reviewing the Treasury’s announcement and wouldn’t “speculate on any potential impact.”
But worried investors pushed Allergan shares down by about 20% in premarket trading. If the stock opens at the reduced price, roughly $ 22.5 billion will be wiped from Allergan’s market capitalization.
Pfizer shares edged higher by about 2.5% before the open.
Pfizer has been openly critical of the U.S. corporate tax system.
In 2014, it tried unsuccessfully to acquire British drug maker AstraZeneca ( and it didn’t hide the fact that tax savings were one of the main drivers. )
Treasury Secretary Jack Lew did not mince words when he talked about the problems of corporate inversions on Monday.
“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,” he said.
Correction: An earlier version of this story incorrectly stated the size of the Pfizer-Allergan deal.