Pfizer, a US-based drug company, is said to dismiss its merger deal with Allergan. The US drugmaker wants to quit from the $160 billion merger deal since Washington authorities set new rules, making corporate inversions harder. On Monday, the government under President Barack Obama proclaimed stricter rules aimed to halt overseas inversions.

Pfizer will need to pay the Botox maker a termination fee of $400 million, Bloomberg said quoting unidentified sources with knowledge of the matter. In 2015, Allegan, which has its legal address in Dublin, agreed on a deal that would have provided Pfizer an overseas dwelling and also the benefit of a smaller tax rate. The merger deal would have created a new company headquartered in Ireland.

But the dreams of Pfizer, enjoying low tax rate in a foreign land, were shaken when the government officials proposed a new rule threatening foreign inversions. According to the new rules, firms that have already involved in acquisitions within the previous 36 months could not part take in further inversion deals. Unfortunately for Pfizer, its deal partner has been involved in many inversion deals within the time frame set by the government.

On Tuesday, Obama said reporters that corporate inversions make "hardworking Americans feel like the deck is stacked against them." Nearly 53 US firms have changed their tax domicile to foreign lands since the time when corporate inversion entered the US soil in 1982. Treasury authorities pointed out that this new rule is not aimed against any specific taxpayer.

According to THE WALL STREET JOURNAL, Allergen would possibly seek more acquisitions on its own as soon as it finishes Teva deal, which involves selling its generic drugs to Teva Pharmaceutical. The journal said that inversion transactions have become common in the US corporate community, with many firms seeking a lower tax rate in foreign markets. The inversions have become a matter of debate even in the presidential election campaign, with candidates criticizing the relocating of US firms in foreign countries and reducing tax bills in the country.

Pfizer and Allergen merger deal was a campaign debate among the Democratic and Republican candidates, who ridiculed the deal. Shares of Allergen dropped 15% on Tuesday trading session, signalling the lack of faith among investors over the merger deal.

Financial Market News reported that Diligent Investors have reduced their shareholdings in the New-York based drug maker by 1.4% in the final quarter of 2015. The seventh largest shareholder sold 820 shares of Pfizer during the period. Sanders Capital acquired new shares in the company worth about $341.2 million. Russell Frank increased its position in the firm by 27.5% and currently owns 18 million shares of Pfizer.

The growing anxiety of the US government regarding the inversion deals prompted it to set new principles in order to safeguard its nationality and also protect its tax gains. Pfizer decided to end the deal with Allergan on fears that US authorities will not allow the deal to take place.