Pfizer to merge with Allergan, move its headquarters to Ireland

That is worth about US$363.63 per share, or 16 percent higher than Allergan’s closing price on Friday.

In Monday’s announcement, Pfizer said that the deal will deliver $2 billion (£1.3 billion) in cost savings per year for the first three years.

If a deal is reached, it would be the biggest ever merger in health care and the largest “inversion” ever – that’s a tax-saving maneuver in which a US company reincorporates in a country with a lower corporate tax rate. The new company will be named Pfizer plc and is expected to be listed on the NY Stock Exchange under the “PFE” ticker.

However, the inability of US Congress to find agreement on legislative reform means Pfizer is free to acquire Allergan in a reverse takeover as long as the Dublin-based target holds more than 40 per cent of the combined company.

The boards of both Pfizer and Allergan on Sunday voted to approve the transaction, one of the people briefed on the matter said.

Many industry investors and analysts believe Pfizer will use Allergan’s rich portfolio to beef up its branded drug business, before going for a business split from the established, patented drug unit by 2017.

The company said it expects that the deal, which still requires shareholder and regulatory approval, will be done by the second half of 2016. The merger between Pfizer and Allergan, which still has to be approved by U.S. regulators, is the latest in a long line of big deals made in 2015, following the Walgreens-Rite Aid, Anthem-Cigna, and Aetna-Humana deals. The acquisition will help Pfizer to slash its tax bill in the USA, but will certainly spark outrage on Capitol Hill and the White House over the maneuver to lower its corporate tax bill.

Following a spate of tax inversions in 2013 and 2014 – notably AbbVie’s acquisition of UK-based Shire – tax-motivated mergers have slowed this year.

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

Pfizer Inc. Chairman and CEO Ian Read will serve in the same roles with the combined company while Allergan Plc. leader Brent Saunders will become president and chief operating officer.

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 coming together of New York-based Pfizer, which manufacturers medications including Viagra, pain drug Lyrica and the Prevnar pneumococcal vaccine, and Allergan that produces Botox and the Alzheimer’s drug Namenda, will make the biggest pharmaceutical company by sales, with about $60 billion in annual turnover.

In afternoon trade, shares of Pfizer dropped 2.5 percent to $31.38 and Allergan fell 2.8 percent to $303.62.