Pfizer, Allergan to merge, creating world’s largest drugmaker

Pfizer, the maker of Viagra and Lipitor, has struck a deal to buy Botox-maker Allergan in a transaction valued at about US$160 billion (S$226 billion), creating the world’s biggest drugmaker.

Pfizer and Allergan will join in a $160 billion deal to create the world’s largest drug maker.

Such deals enable a US company to move overseas and take advantage of a lower corporate tax rate elsewhere, and have remained popular in the face of USA efforts to curb them.

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.

Last year, Pfizer made a £70bn bid for AstraZeneca in what was widely perceived as an early attempt to make a tax inversion.

The deal comes at a shaky time for tax inversions in the U.S. Less than a week ago the Obama administration pointed a renewed attack on corporate tax inversions.

Under the terms of the all-share deal, Pfizer would essentially pay $363.63 for each Allergan share, representing a more than 30 percent premium to Allergan’s share price in late October before news emerged that they were in talks. The combined board will include all 11 current Pfizer directors and four current Allergan directors.

Despite attempts by Congress and the Treasury Department to thwart the practice, about 50 USA companies have inverted in the past decade, and more are considering it, according to the nonpartisan Congressional Research Service.

Pfizer chairman and CEO Ian Read will run the combined company.

For the deal to go forward, the companies will have to receive approval from antitrust regulators around the world. By tapping into Pfizer’s much larger geographic reach, Allergan can expand sales of its products, said Ashtyn Evans, healthcare analyst for Edward Jones.

The companies estimated the merger would increase earnings per share 10%, excluding special items, in 2019 and add by a high-teens percentage rate in 2020.

The biggest deal in the history of pharmaceutical is here and Pfizer Inc. will become Pfizer plc.

In this case, the deal is structured so that Allergan is technically the purchaser, even though Pfizer is the larger company. Current Allergan shareholders will own 44 percent of the combined company, while Pfizer shareholders will own 56 percent.

Trump has been particularly critical of United States companies that shift their operations oversees.

Post-merger, Pfizer will maintain Allergan’s Irish legal domicile, while having its global headquarters in NY and its principal executive offices at Dublin in Ireland.