Pfizer To Buy Allergan In $160 Bln Deal

An inversion is a tax-saving maneuver in which a USA business reincorporates in another country, one with a lower business tax rate.

The deal calls for the businesses of Pfizer and Allergan to be combined and renamed Pfizer plc, which will be listed on the NY Stock Exchange and trade under the “PFE” ticker.

Pfizer shareholders are expected to hold 56 percent of the merged company, with Allergan shareholders the remaining 44 percent. This represents a premium of more than 30% and brings the acquisition value to a total of $160 billion.

Mr. Sanders called the potential deal a “disaster”. It had a market cap of about $3.8 billion by late 2008. And companies can borrow very cheaply to do these deals.

Pfizer Chief Executive Ian Read will be CEO of the combined company, while Allergan CEO Brent Saunders will be chief operating officer. In fact, for reducing USA corporate tax, even if President Obama has labeled this type of transactions “unpatriotic”, smaller Allergan will buy Pfizer. Pfizer executives said they were confident the deal would not flout USA rules discouraging so-called inversions, including new measures announced last week by the Treasury Department. Analysts said the rules didn’t appear to be able to thwart a combination of Pfizer and Allergan, though the risk of government action remains.

The deal is subject to approval by antitrust regulators throughout the world, according to the Wall Street Journal.

Pfizer said it did not plan to change its dividend policy of paying out roughly half of an adjusted measure of earnings per share and would continue with its planned 5 billion share buyback in the first half of 2016. By 2020, Pfizer expects the transaction to increase adjusted profit by a high-teens percentage.

Pharmaceuticals mergers have come thick and fast this year, including Teva’s purchase of Allergan’s generics business for $40.5bn, while Pfizer, who had its £69bn bid to acquire AstraZeneca rejected by the company’s board in May last year, was successful in the acquisition of Hospira for $16bn earlier this year.

Pfizer’s big drugs are Viagra and Lipitor, and Allergan’s brands include Botox, and the new pipeline will have more than 100 mid-to-late stage programs in development. The company’s drugs and vaccines would cover a range of diseases, from Alzheimer’s to cancer, eye health to rheumatoid arthritis.

Pfizer stockholders will have the option of receiving one share of the combined company for each of their Pfizer shares or receive cash, provided the aggregate amount of cash to be paid is not less than $US6 billion or more than $US12 billion.

Allergan PLC and Pfizer Inc. will merge in a deal worth about $155 billion. If you look at 2014, Pfizer paid a rate of about 25 percent in US taxes.