Pfizer nails down Allergan deal ahead of United States crackdown

It (Other OTC: ITGL – news) would have annual revenues of almost £43bn, derived from drugs including Pfizer’s widely known Viagra and Botox, the wrinkle treatment made by Allergan.

The transaction is structured so that Dublin-based Allergan is technically buying its much larger partner, a move that may make it easier for the company to locate its tax address in a lower-cost country.

The companies said the transaction would lower Pfizer’s current USA tax rate of 25 per cent, to the Irish levy of 17 to 18 per cent.

“The proposed combination of Pfizer and Allergan will create a leading global pharmaceutical company with the strength to research, discover and deliver more medicines and therapies to more people around the world”, Ian Read, the Pfizer chief executive, said in a news release Monday.

Hillary Clinton, the front-runner for the Democratic presidential nomination, blasted Pfizer for using legal loopholes to avoid paying its “fair share” of US income taxes in a deal she said “will leave USA taxpayers holding the bag”.

Last year, Pfizer’s attempted takeover of AstraZeneca failed, but was at least in part motivated by tax.

President Barack Obama has called inversions “unpatriotic”.

The company’s board of directors will retain all 11 of Pfizer’s current directors and four current directors at Allergan will be brought on board. Pfizer stock owners will hold an approximately 56 percent stake in the combined company, while Allergan shareholders will own the remaining 44 percent.

Speculation has been rife on Wall Street whether Read or Saunders would take the helm of the combined company, and whether Saunders would be content to play second fiddle to Read, who became Pfizer CEO in 2010 after more than 30 years with the company.

This process, known as corporate inversion, is a common yet controversial process that has seen USA companies lessen their tax burden by shifting their corporate infrastructure to Ireland.

Ireland-based Allergan confirmed October 29, that it was approached by the USA drug company Pfizer regarding a potential deal. Following the sale, the combined company will be named Pfizer PLC and continue to trade on the New York Stock Exchange. The Treasury Department has taken steps, including several announced last week, to try to hamper inversions.

The combination will give Pfizer financial flexibility to facilitate its discovery and development of innovative medicines for patients, return of capital to investors and investment in the United States, while enabling its business development opportunities on a competitive footing in the industry.