Pfizer to buy Allergan for Dollars 160 bn

(NYSE:PFE) and Allergan PLC (NYSE:AGN), where Pfizer would acquire Allergan in a mostly-stock-financed transaction for a total enterprise value of approximately $160 billion, and would create the largest drug company in the world.

But though not explicitly signalling as much, those synergies may be good news for Ireland because there is relatively little overlap in the products made by Pfizer and Allergan worldwide.

In what would be the biggest inversion ever, New York-based Pfizer could save hundreds of millions in US taxes annually because it would move its tax headquarters to Ireland, where Allergan is based.

The deal, which would create the world’s biggest drugmaker by sales, is the latest in a series of takeovers in which a United States company effectively relocates its headquarters overseas to exploit another country’s lower corporate tax regime – a process known as tax inversion.

As a result of the decision to maintain Allergan’s Irish legal domicile, Pfizer said it expects its tax rate to drop to 17 to 18 percent from its current 25 percent.

Asian stocks were mixed Tuesday morning after US indexes slipped Monday, dragged down in part by questions over the Pfizer-Allergan merger. President Barack Obama has called inversions unpatriotic and is pushing to crack down on deals, with limited success. In October 2014, Chicago-based AbbVie and Dublin-based Shire Pharmaceuticals called off a $54 billion inversion deal after the Treasury issued new rules. Analysts believe that to help secure the lower tax rate the deal would be structured in a such a manner that it looks like a reverse merger with Allergan buying Pfizer.

Pfizer Chief Executive Ian Read will be CEO of the combined company, while Allergan CEO Brent Saunders will be Chief Operating Officer, the companies said on Monday.

New York-based Pfizer and Allergan, headquartered in Ireland, said yesterday that Pfizer would offer 11.3 of its own shares for each Allergan share.

However, after the announcement shares of both the companies were down in mid-day trading on November 20, indicating investors are not happy with the deal.

It could end up being the world’s second-largest merger following British telecom company Vodafone’s purchase of Germany’s Mannesmann for $172 billion, including debt, in 1999.

Clinton also said that she would propose specific steps in the coming weeks to prevent corporate inversions, “which take advantage of loopholes that litter our tax code, distort incentives for investment and disadvantage small businesses and domestic firms that can not game the global tax system”.

The deal is also expected to deliver cost savings of more than $2bn (£1.3bn) within the first three years of completion.