Pfizer to buy Allergan in $US160 billion deal

Following the sale, the combined company will be named Pfizer PLC and continue to trade on the New York Stock Exchange. Pfizer’s ownership share would fall below the 60% threshold to qualify as a tax inversion under the USA tax code, said Robert Willens, an worldwide tax law expert based in New York City.

Critically, the terms of the deal propose that the merged company will maintain Allergan’s Irish domicile.

The deal is expected to close at the end of next year.

Their combined medicine chest would put Pfizer staples such as impotence treatment Viagra, cholesterol fighter Lipitor and nerve pain treatment Lyrica alongside Allergan’s Botox wrinkle treatment, Alzheimer’s drug Namenda and dry-eye medication Restasis.

Paul Heugh, the CEO of strategy execution specialists Skarbeck Associates, said the reduction in tax and savings would have been a compelling reason for Pfizer crucial in making the merger so attractive.

Even though this deal is structured in a way that looks like Allergan is purchasing Pfizer, the company’s control will be retained by Pfizer.

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

The takeover could allow Pfizer to escape relatively high USA corporate tax rates by moving its headquarters to Allergan’s headquarters in Dublin.

In all, 140,000 people are directly employed by over 700 USA companies in Ireland, a country of 4.6 million people, according to the American Chamber of Commerce in Ireland.

Pfizer said it expects to buy back about $5 billion in shares in the first half of next year under an accelerated program. The Pfizer-Allergan deal is undoubtedly guilty of some form of these tactics.

The transaction will expand Pfizer’s offerings, which will include additions like Allergan’s Botox and Kythera’s Kybella.

Brent Saunders, Allergan chief executive, added, “This bold action is the next chapter in the successful transformation of Allergan, allowing us to operate with greater resources at a much bigger scale”.

Several U.S. drugmakers have performed inversions through acquisitions in the past several years, in part to escape higher U.S. corporate tax rates.

It was not immediately clear how many jobs would be lost as a result of the deal.

The deal values Allergan shares at $363.63 each, about 16% more than their closing price of $312.46 on Friday. U.S. President Barack Obama has called such inversion deals unpatriotic and has tried to crack down on the practice. Pfizer shares closed 2.64 percent lower at $31.33 and the Allergan shares closed down 3.44 percent at $301.72.

The deal might have been described as a mega-merger in the pharma industry, but some of the leading analysts and pharma company executives in India told Business Today it doesn’t hold much ground for Indian pharma companies. What inversions involve, basically, is a United States based company buying a peer or rival with headquarters in a foreign locale where taxes are lower, and then re-incorporating there.