Pfizer, Allergan to merge in $160bn deal

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

The tie-up – the third biggest corporate deal of all time – will create the world’s biggest drug maker by sales, with USA firm Pfizer effectively swallowing up Allergan for $160bn (£106bn).

Pfizer shareholders will receive one share of the combined company for each Pfizer share and will be eligible to receive at least a few of their shares in cash. The companies on Monday said the businesses of Pfizer and Allergan will be combined under Allergan, which will be renamed Pfizer PLC and trade under the ticker symbol PFE, Pfizer’s current symbol, on the NY Stock Exchange.

Pfizer and Allergan have closed a merger deal worth $150 billion.

Read will become the chief executive of the new Pfizer plc, while Allergan chief executive Brent Saunders will become chief operating officer with oversight of all Pfizer and Allergan’s combined commercial businesses, manufacturing and strategy functions. “Through this combination, Pfizer will have greater financial flexibility that will facilitate our continued discovery and development of new innovative medicines for patients, direct return of capital to shareholders, and continued investment in the United States, while also enabling our pursuit of business development opportunities on a more competitive footing within our industry”.

The deal is a victory for Read, who in 2014 sought an inversion transaction with AstraZeneca, but was repeatedly rebuffed by the British company, which said Pfizer had undervalued its business. And it places the companies squarely in a presidential election debate over efforts by USA companies to obtain lower tax rates by using mergers to move their headquarters overseas.

The merger will create a pharmaceutical behemoth, with top-selling products including Pfizer’s Prevnar pneumonia vaccine and Allergan’s anti-wrinkle treatment Botox and industry-topping R&D budget.

Pfizer said the merger is expected to be neutral to its adjusted diluted earnings per share in 2017, will add to EPS starting in 2018, rising in 2019 to 10% and to the high teens in 2020. Pfizer also said it will carry out a roughly $5 billion accelerated share repurchase program in the first half of 2016. These expectations include the impact of expected share repurchases following the transaction.

The transaction is not expected to have an impact on Pfizer’s existing dividend level on a per share basis. Pfizer has approximately $5.4 billion remaining under its previously announced repurchase authorization.

The deal will be subject to regulatory approval both in the US and in Europe.

Allergan is the result of a number of mergers in quick succession.