Pfizer nails down Allergan deal ahead of U.S. crackdown

Pfizer and Allergan on Monday morning announced they would merge in a massive, $160 billion deal that will create the world’s largest drugmaker, producing treatments as varied as Lipitor and Botox.

To avoid the possible restrictions, this deal has Allergan, the far smaller of the two entities is purchasing Pfizer, although the new combined company will be called Pfizer Plc and will have Ian Read as CEO, who is the current Pfizer CEO.

The companies also said the transaction would lower Pfizer’s tax rate to the Irish levy of 17-18 percent.

Read said, “Through this combination, Pfizer will have greater financial flexibility that will facilitate our continued discovery and development of new innovative medicines for patients”.

The deal must win approval of both European and USA regulators before it can be completed.

Allergan shareholders will receive 11.3 shares of the combined company for each of their Allergan shares, and Pfizer investors will receive one share of the combined company for each of their Pfizer shares. Pfizer tried a similar strategy a year ago, but its bid to buy U.K.-based AstraZeneca for $119 billion was unsuccessful.

The US Treasury, concerned about losing tax revenue, has been taking steps to clamp down on tax inversion deals but experts have said these moves will do little to prevent Pfizer from shifting its domicile.

Provided the latest deal is approved, Viagra manufacturer Pfizer could shift its tax base to Ireland, where Allergan is headquartered.

Read on to find out more about this deal.

Pfizer is doing the largest inversion deal of all time. Pfizer will have its global operational headquarters in NY and its principal executive offices in Ireland.

Several U.S. drugmakers have performed inversions in recent years. It is important to point towards the fact that the company has done three sizeable deals since 2000 to boost revenues. The company was expected to pay about 25% in corporate taxes this year, compared with about 15% for Allergan.

The New York-based Pfizer and Dublin-based Allergan was in deal to have a merging that will make the biggest drugmaking behemoth in pharmaceutical history.

By acquiring Allergan, Pfizer would not only save on its overall tax rate, but it would also be better able to use earnings from its worldwide operations for additional acquisitions or other activities.

Stockholders of Pfizer can choose to get cash or a single share of their combined company for every share of theirs. “While we understand the rationale for an “inversion” deal for Pfizer (and its eventual splitting into two companies), we think the rationale for Allergan is less compelling”.