Pfizer and Allergan to Merge

The deal values Allergan shares at $363.63 each, about 16 per cent more than their closing price of $312.46 on Friday. The list of companies includes Allergan, which still runs much of its operation out of New Jersey, and the generic drugmaker Mylan. The latest rules would not impede the Pfizer-Allergan transaction, analysts said. In the proposed Allergan-Pfizer deal, the shareholders of Allergan will own 44 percent of the merged company, while Pfizer shareholders will own 56 percent. That split depends on a few Pfizer shareholders electing to cash out, fully or partially, an option for which Pfizer is setting aside $6 billion to $12 billion.

But, despite efforts by both executive teams to play down the differences, the two companies are cut from very different cloth.

The company was expected to pay about 25 per cent in corporate taxes this year, compared with about 15 per cent for Allergan.

Among many other drugs, Pfizer manufactures pneumonia vaccine Prevnar, erectile dysfunction drug Viagra, and cholesterol fighter Lipitor, while Allergan makes wrinkle-controlling Botox, dementia-inhibitor Namenda and the anti-depressant Fetzima.

In the past, Pfizer’s mergers have taken a heavy toll on CT, sometimes unfolding over years.

Sen. Charles Schumer, D-N.Y., a member of the Senate Finance Committee, called Pfizer’s move “truly disturbing”, given how the company has benefited from federally funded research and infrastructure. The deal between the two brewing companies was roughly worth $107 billion.

The move will be an embarrassment to the Irish government, which has battled unsuccessfully to shift worldwide perceptions that Ireland is a key node in the tax avoidance strategies of many multinational firms. What inversions involve, basically, is a U.S. based company buying a peer or rival with headquarters in a foreign locale where taxes are lower, and then re-incorporating there.

Republican front-runner Donald Trump, who has called for a corporate tax overhaul, called the deal “disgusting” in a statement, saying “our politicians should be ashamed”.

The Pfizer-Allergan deal is likely to fuel critics’ concerns that consumers would pay even more for drugs as competition declines among manufacturers, insurers and retailers.

The technique is called “hopscotching” because the money – at least on paper – bounces from country to country while avoiding U.S. taxes. It would be the sector’s biggest deal, topping Pfizer’s 1999 acquisition of Warner-Lambert for $111.8 billion. “That is our obligation”, he said.

“Here’s the problem: Instead of a culture of discovery and innovation, the accountants are in charge and you better do whatever they say”, said Stephen Brozak, an analyst who heads WBB Securities and tracks the pharmaceutical industry. Pfizer’s shares had fallen 9.2 percent. But until that happens, the money remains out of reach of the US Treasury Department – and this is not good news for the USA economy or American taxpayers. The advocacy organization pointed out that Pfizer hasn’t owed taxes over the past five years. All of those were markets from which Pfizer exited over the years, because of its lack of leadership in them.

Allergan Chief Executive Brent Saunders will become president and chief operating officer of Pfizer Plc.

Allergan has about 2,100 employees in the Los Angeles-area city of Irvine, where it was formerly headquartered, and an additional 300 in nearby Corona out of a global workforce totaling 30,000. “I oppose the Pfizer merger now, just as I opposed the last Pfizer merger as Governor of Maryland, because it would have cost Maryland jobs and sent corporate taxes overseas”, he said in a statement. Significant chapters of the pharmaceutical industry’s history will now be refiled under the Pfizer – and Teva – banners, including Actavis, Forest Laboratories, Warner Chilcott and Galen.

The alternative is “business development”, shorthand for more M&A.