Pfizer, Allergan Come Together In A $160 Billion Merger

And the companies have structured the deal-with the smaller Allergan technically buying Pfizer-in order to shield it from an inversion crackdown. While merged companies tend to focus on cutting duplication, Pfizer and Allergan have distinct drug portfolios – Pfizer with drugs including Viagra and Lipitor and Allergan, which makes Botox – and so not much overlap, said Mahmud Hassan, a finance and economics professor at Rutgers University, who specializes in the pharmaceutical industry.

Bloomberg, which has a good explainer on inversions here, has described it as USA companies effectively “renouncing their citizenship”, although they typically do retain operational headquarters in America.

“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 more therapies to more people around the world”, said Mr. Read.

“The combination only leaves the Pfizer shareholders with 55 or 56 percent of new company, not the 60 percent threshold that’s required to trip these anti-inversion rules”, he said.

The companies’ boards of directors reportedly approved the deal Sunday, according to the Wall Street Journal.

US-based reporters said the deal is sure to draw political ire in a USA presidential election year.

As per the transaction terms, the businesses of Pfizer and Allergan will be combined under Allergan plc, which will be renamed “Pfizer plc”.

The combined company is expected to maintain Allergan’s legal and tax residency in Ireland.

At a minimum, Pfizer will pay, after the move to Ireland, roughly 17-18 per cent in Irish corporation tax, compared to the 25 per cent it now pays in the US.

In a joint statement released by both Pfizer (NYSE:PFE) and Allergan, the companies declared that the deal entails a premium of 30% which is based on the cost of the unaffected shares of both companies. “It also would allow another major American corporation to hide its profits overseas”.

Allergan chief executive Brent Saunders said the deal brought together “two biopharma powerhouses”.

The combined company will be known as Pfizer Plc, whose value will soar above that of its rivals.

Pfizer stockholders can get cash or one share of the combined company for each of their shares, but the aggregate amount of cash must range from $6 billion to $12 billion. The deal could also give Pfizer a much-needed growth jolt.

It could end up being the world’s second-largest merger, following British telecom company Vodafone’s purchase of Germany’s Mannesmann for $239 billion, including debt, in 1999. In pre-market trade on Wall Street, shares in Pfizer dropped 2.5 percent to $31.36 and Allergan fell 1.5 percent to $307.76.