Pfizer, Allergan to merge in $160 billion deal

Pfizer plans to move its tax address from the U.S. to Ireland, if only on paper, by buying and merging into Allergan, a smaller, Dublin-based competitor.

(Sarah Menendez/Marketplace) The USA has been trying to crack down on inversions since 2004, said Steve Rosenthal, a senior fellow at the Tax Policy Center.

Because Allergan is based in Ireland, merging with the company will allow Pfizer to cut its tax rate significantly, from about 25% to 17 or 18%.

The combination – the second-largest merger in history – could have ramifications around the globe, pushing up drug prices and spurring more such deals in the fast-consolidating health care sector and other fields.

Pfizer is known for providing drugs such as Lyrica, Enbrel and Viagra.

Allergan produces the wrinkle treatment Botox and Restasis for dry eyes, and also has a superior pipeline of medicines in development.

“The Pfizer-Allergan merger is fundamentally unfair, and a prime example of how our capitalist economy is not supposed to work”, he said in a statement.

Read said lowering Pfizer’s taxes wasn’t the only motivation. The United States has already lost billions of dollars in tax revenues from inversions, particularly in recent years.

The entire value of the merger is approximately $160 billion.

Despite the “reverse” nature of the deal, Ian Read, Pfizer’s Scottish-born boss, will head the combined company with Brent Saunders, his counterpart at Allergan, becoming chief operating officer.

Mr Saunders said: “This bold action is the next chapter in the successful transformation of Allergan allowing us to operate with greater resources at a much bigger scale”. The transaction represents more than 30 per cent premium based on Pfizer’s and Allergan’s unaffected share prices as of October 28, 2015, it further said.

The deal would involve Pfizer paying with 11.3 of its shares for each Allergan share, the people said.

One answer: Pfizer executives indicate they will consider splitting the combined company by 2018, bringing together the common strengths of each into two new entities.

Pfizer shareholders will receive one share of the combined company for each Pfizer share and will be eligible to receive at least a few of their shares in cash.

The companies didn’t want to drop the neutral tone Pfizer has used to describe its deliberations because it doesn’t want to hurt morale, according to a person familiar with the matter.

Read, a trained accountant, has said Pfizer could decide on such a split by late 2016, after it completes separate financial analyses of the two businesses.

As Gustav Ando, research director for the business information and consulting company IHS Life Sciences, told the Washington Post: “This merger isn’t meant to benefit patients, it isn’t meant to innovate in any kind of way…and certainly the benefits won’t be passed on to consumers”.