Pfizer and Allergan Merges: A Deal Worth $150 Billion

Pfizer dropped 2.6 percent and Allergan 3.4 percent after the drug companies announced their $160 billion merger. Pfizer shareholders would receive one share in the combined company for each share they hold, but they have the option to take up to $12 billion in cash for some or all of their shares instead.

The path-breaking agreement between American and Irish companies harnesses a controversial tax-saving strategy called the tax inversion.

Pfizer plc would have its global operational headquarters in NY and its principal executive offices in Ireland.

It will also reignite debate in the pharmaceutical industry over the role of research and development, with Allergan chief executive Brent Saunders, a prolific deal maker and a sceptic of in-house drug discovery, joining the combined company.

Pfizer says the merger will significantly enhance its innovative businesses through a growing revenue stream from Allergan’s “durable and innovative flagship brands”, as well as enhance its R&D capabilities in both new molecular entities and product-line extensions.

Senate Minority Leader Harry Reid, D-Nev., released a statement Monday criticizing drug giant Pfizer Inc.’s (PFE) acquisition of Irish rival Allergan plc (AGN) as a classic case of a corporate inversion.

USA politicians condemned Pfizer’s deal with Allergan as a tax dodge on Monday (23 November), bringing another round of hand-wringing in Washington over the corporate tax code, though legislative action before 2017 is unlikely.

Allergan as well as Pfizer shares were down more than 2% on the news.

The transaction will expand Pfizer’s offerings, which will include additions like Allergan’s Botox and Kythera’s Kybella.

Clinton has also said she would pursue tax reform, and said she will unveil details about ways to manage corporate tax inversions soon.

The deal caps a merger spree throughout the US health care industry this year, which already has seen a record $448 billion in announced deals, according to Dealogic, which tracks the market.

The deal is yet to be approved by United States regulators, but Mr Read expressed confidence the deal would pass muster.

The transaction, which requires shareholder and regulatory approval, is expected to close in the second half of 2016 but could face stiff opposition from US lawmakers.

“Two billion dollars of savings in the first three years, together with an attractive tax inversion sounds like a compelling reason for a merger”, Heugh said, although warned that often mergers did not succeed in their primary objectives.