Global stock markets were feeling no pain yesterday from the collapse of what would have been the world’s second-largest merger ever when Pfizer and Allergan abandoned their $160bn tieup.
European markets ended the day with solid gains while Wall Street also pushed higher in midday trading, with shares in most of Pfizer’s rival pharmaceutical companies posting solid gains.
London’s FTSE 100 rose 1.2% at 6,161.63 at close; Frankfurt’s DAX 30 was UP 0.6% at 9,624.51, while Paris’ CAC 40 gained 0.8% at 4,284.64. The EURO STOXX 50 was up 0.6% at 2,907.04.
Pfizer said it was abandoning plans to merge with Ireland-based Allergan, citing new US rules cracking down on tie ups aimed at saving on taxes.
The deal would have resulted in the merged company’s headquarters being Ireland, which has much lower corporate tax rates then the US, although most of its business would continue to be in the US.
Pfizer’s decision to call off the merger came after the US Treasury Department announced new rules to discourage mergers between US and foreign businesses designed to sharply lower the US company’s tax bill.
“The termination of the Allergan-Pfizer merger has counter-intuitively sparked buying in other UK and Irish pharmaceutical groups,” said CMC Markets analyst Jasper Lawler. “Speculation that Pfizer will look for another partner in its quest to relocate its headquarters and lower its tax burden has sent the shares of Shire and AstraZeneca flying,” he added.
Shire shares shot up 5.2%, AstraZeneca jumped 4.5% and GlaxoSmithKline added 3.0%.
Swiss-based Novartis gained 2.3% and France’s Sanofi rose 3.5%.
Shares in Allergan, which are listed in New York and plummeted 14.8% on Tuesday, clawed back 3.2% on Wednesday.
Pfizer shares climbed 2.8% after gaining 2.1% on Tuesday.
In other corporate activity, shares in Air France-KLM slumped 3.2%, a day after the company said Alexandre de Juniac is to resign as chairman and CEO to take charge of aviation industry group IATA.
Glencore dropped 1.2% after the commodities giant announced it was selling nearly half of its vast agriculture business to a Canadian pension fund for $2.5bn (€2.2bn), in cash.
US antitrust officials also filed suit yesterday to block Halliburton’s proposed $34.6bn takeover of rival Baker Hughes that would create a global oil services giant.
Shares in both companies rose on the news, with shares in Halliburton climbing 5.2% and Baker Hughes gushing 7.0% higher.
Most Asian markets edged up yesterday but early gains from an oil rally tapered off, with worries about the global economy and the upcoming earnings season keeping traders on edge.
The return of nervousness to global markets put further pressure on the dollar, which was sitting at 17-month lows against the yen.
File photo taken on October 2, 2014 shows a view of branding outside Pfizer Pharmaceuticals factory on the outskirts of Cork, southern Ireland. Pfizer shares yesterday climbed 2.8% after gaining 2.1% on Tuesday.
