President Obama tightens AstraZeneca's Nose!

The Obama Administration is moving to unilaterally clamp down on U.S. companies seeking friendlier tax havens, and its move hitAstraZeneca shares Tuesday morning.

Some background: U.S. pharmaceutical giant was rebuffed in its pursuit of the U.K.’s AstraZeneca earlier this year, and under takeover rules across the pond, must cool its heels for several months before reengaging. That cooling-off period ends in late November, but also left the Pfizer PFE -0.53% eyeing its target from a distance as the Treasury Department lays out new rules to block such deals.

The Obama administration moved on Monday to try to discourage companies from leaving America by limiting the benefits of tax-lowering deals.

The U.S. Treasury Department issued new rules that are aimed at slowing the wave of so-called inversion deals that has seen U.S. companies redomicile in overseas jurisdictions like Ireland by entering into mergers and transactions with foreign companies.

The rules, which will only apply to future deals, target certain techniques that inverting companies have used to reduce their U.S. taxes, like accessing the overseas earnings of foreign subsidiaries without paying U.S. taxes. The Treasury rules will also make it harder for U.S. entities to invert by strengthening the requirement that former owners of a U.S. company own less than 80% of the company after the inversion deal has taken place.

Still, as Treasury Secretary Jacob Lew conceded on a conference call on Monday, the Obama administration’s unilateral move will only have limited effects when it comes to curbing inversion deals. The President, who has called companies that enter into inversion deals “corporate deserters,” has said that he decided to act in such a manner after being unable to get Congress to support anti-inversion legislation.

Companies will still be able to conduct inversion deals and some of the tax benefits will remain robust. Inversion deals have become very popular this year and have involved players ranging from Burger King to Senator Joe Manchin’s daughter (the CEO of Mylan) and Warren Buffett. Wall Street and billionaire hedge fund managers have cheered these deals on, but political pressure has helped derail one major such deal. Walgreen’s, the nation’s biggest pharmacy chain, decided to remain headquartered outside of Chicago even as it finishes purchasing Swiss-based Alliance Boots.

“Inversion transactions erode our corporate tax base, unfairly placing a larger burden on all other taxpayers, including small businesses and hardworking Americans,” Lew said on a conference call. “This shifting of a firm’s tax address is not the same as a merger driven by business reasons, such as efficiency or expansion. These transactions may be legal, but they are wrong, and our laws should change.”

Tuesday evening, the Treasury issued a series of rules meant to make such inversion transactions less attractive, though they won’t apply retroactively to existing deals. The rules aim to prevent U.S. companies from using cash held in foreign subsidiaries to complete overseas deals without paying domestic taxes, and require that U.S. shareholders of companies pursuing such deals own less than 80% of the combined company. They also come after President Obama referred to such companies as “corporate deserters” in July. (See “Corporate America’s Hunt For Lower Taxes Won’t End With Burger King & Tim Horton’s.”)

AstraZeneca dropped 4.5% Tuesday morning, falling along with other inversion targets like Irish pharmaceutical company Shire , which agreed to a $54 billion deal withAbbVie ABBV -1.86% in July and fell 1.7%. Shares of Pfizer meanwhile, fell 0.7%.

Those declines may be overdoing it though. Citi analyst Andrew Baum suggested in a note Tuesday that the measures announced by Treasury “do little to negatively impact the economic benefit” of a proposed Pfizer/AstraZeneca tie-up, as Pfizer could drop its tax rate from 28% to 22% even without using the so-called “hopscotch” loans the new rules aim to prevent.

“[W]e continue to believe that Pfizer will re-engage with AstraZeneca shareholders post Nov. 26th given the multiple strategic, cost and tax benefits that remain despite [Treasury’s] action,” Baum wrote. If he’s write, the drop in AstraZeneca could be a buying opportunity before those talks rekindle.