Drugmakers Pfizer, Allergan to combine in $160 billion deal

The sources said if things work out, Pfizer and the Botox maker together will create the largest drug maker of the word.

Last week, the US Treasury Department and the Internal Revenue Service announced new rules meant to further clamp down on the benefits of such mergers. S. presidential election as the deal will make Pfizer would re-domicile in Ireland.

It also reignites debate in the pharmaceutical industry over the role of research and development, with Allergan Chief Executive Brent Saunders, a prolific dealmaker and a skeptic of in-house drug discovery, joining the combined company in a position to influence its strategy. Pfizer stockholders get one share of the combined company for each of theirs.

The news out this morning that Pfizer (PFE) struck a 5 billion merger with Allergan (AGN) came as no surprise given all the media reports and speculation in recent weeks.

Pfizer’s blockbuster products like Lipitor, Viagra, and Lyrica would combine with a few of the biggest ventures by Allergan, including anti-wrinkle treatment Botox, dry eye drug Restasis, and Alzheimer’ drug Namenda.

A month ago, Allergan, which has a sizable operation in Irvine, Calif., said it was approached by New York-based Pfizer but cautioned that there was “no certainty” that the “friendly” discussions would lead to a merger.

And since Pfizer’s Chief Executive Ian Read, 62, will be CEO of the combined company, and Allergan’s current CEO Brenton Saunders, 45, will be Read’s deputy, The Guardian speculates that the merger can be considered as an inversion. If completed, it would cap a remarkable consolidation wave roiling the USA health-care industry and create the world’s biggest drugmaker by sales.

The deal would involve Pfizer paying with 11.3 of its shares for each Allergan share, the people said. New reports say that the two healthcare giants might be announcing one of the biggest healthcare mergers on Monday. “Pfizer anticipates that the combined company will have a pro forma Adjusted Effective Tax Rate of approximately 17%-18% by the first full year after the closing of the transaction”. The Pfizer-Allergan deal drew such criticism amid the ongoing debate about higher drug prices.

The deal comes four days after the Obama administration stepped up its attack on corporate tax inversions – transactions in which a USA company reincorporates in a lower tax jurisdiction overseas in a bid to cut future tax bills.

In midday trade, shares of Pfizer dropped 1.8 percent to $31.60 and Allergan fell 2.4 percent to $304.95. The market saw takeover of the generic injectable drug-maker as Pfizer’s way of making its generic unit attractive for possible acquirers. However, as a counter to these strengths, we find that the growth in the company’s earnings per share has not been good.