United States stocks mostly up as Pfizer, Allergan merger in focus

For 166-year-old Pfizer, Allergan would be the fourth huge acquisition over the last 15 years – one for each of the last 4 CEOs – following purchases of Warner-Lambert, Pharmacia and Wyeth.

Its global operating headquarters would be in NY, and its principal executive offices would be in Ireland.

Like most other large pharmaceutical companies, Allergan and Pfizer have both grown significantly in size in recent years primarily through acquisition. Bernie Sanders (I-Vermont) and Republican presidential candidate Donald Trump, have begun to take a stance against the deal.

Allergan shareholders would receive 11.3 shares in the combined company for each of their shares.

The merger is subject to approval from regulators in the US, European Union and elsewhere.

It would also delay the decision by Pfizer of selling off the division of products that are facing competition from generics.

The combination will give Pfizer financial flexibility to facilitate its discovery and development of innovative medicines for patients, return of capital to investors and investment in the U.S., while enabling its business development opportunities on a competitive footing in the industry. The U.S. Treasury is leading the government’s effort to rein in inversions through tax rules, but their proposed rule won’t cover this deal, and the effort doesn’t attack the inversion deal makers where it will hurt them most.

The Treasury said in an e-mailed statement Monday that it doesn’t comment on specific transactions.

There’s not a drug or device company on the planet that can make a go of things without selling into Medicare and Medicaid: Medicare alone buys more than $100 billion of the pharmaceuticals sold in the US each year.

President Obama has called such companies “corporate deserters” who are being “unpatriotic” by seeking to reduce their contribution to USA coffers.

The companies also said the transaction would lower Pfizer’s tax rate to the Irish levy of 17-18 percent.

Chiang wrote, “At the end of the day, we think Allergan shareholders may be left wondering what the rationale of such a deal is, especially given the fact that its shares are now trading at ~$303, post the announcement of one of the largest pharma deals ever”. Each new deal puts pressure on smaller rivals to bulk up. Besides health care and pharmaceuticals, the wave of deal-making has also swept through airlines, timber, telecommunications and brewers.

For consumers, however, such combinations could lead to higher drug prices, as well as higher taxes to cover the lost tax revenue, said Jerry Reisman, a NY merger expert.

Asked on a conference call about the regulatory outlook and potential backlash against the inversion, Pfizer chief executive Ian Read said, “We assessed the legal regulatory landscape and moved forward”.

It is unclear how this deal will impact the companies’ agency relations.

WASHINGTON (AP) – Fewer Americans bought homes in October, a sign that rising home values may be pushing more would-be buyers to the real estate market’s sidelines.

US-traded Allergan shares dropped 2.1 per cent to $US306.00.

For perspective, Pfizer has reported income of .4 billion on $47.9 billion worth of sales over the course of the past four quarters. In 2014 the company spent $1.08 billion on R&D and $1.85 billion on selling and marketing.

However, the company would then have its tax domicile in Ireland where taxes will be as low as between 17% and 19%, while in the USA they would be 25% or higher.