Allergan shareholders will receive 11.3 shares of the combined company for each of their shares. The news prompted Democratic presidential front-runner Hillary Clinton to promise to propose measures to prevent the increasingly popular and controversial practice aimed at helping USA companies lower their taxes by re-incorporating overseas.
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Now No. 2 among drugmakers globally, Pfizer posted revenue of $49.6 billion in 2014, when Allergan reported $13.1 billion.
The merger was driven by tax considerations, with Pfizer carrying out what is known in the USA business world as a tax inversion deal.
Last year, the Treasury Department issued new regulations to curb the financial benefits of inversions.
But Pfizer is expected to lead the combined company, which would have more than $63 billion in combined sales and a product portfolio that includes Viagra, Celebrex, Botox and the cosmetic treatment Juvéderm.
Read on to find out more about this deal.
Scott, who owns the Bailey Insurance Agency, which is near Pfizer, says “People are really anxious about GE leaving the other end of the state”.
“I want to stress that we’re not doing this transaction simply as a tax transaction”, Read told investors in a conference call Monday.
But a few Democrats criticized the deal, which in effect turns one of America’s largest corporations into a foreign company.
Senator Bernie Sanders, Clinton’s chief rival for the Democratic nomination, said the deal “would allow another major American corporation to hide its profits overseas”.
Allergan as well as Pfizer shares were down more than 2% on the news. “It’s perfectly sensible to move to a better corporate tax environment”.
“Certain patients are going to not only see elevated prices but potentially a loss of choice”, said Jamie Court, president of advocacy group Consumer Watchdog. “The new company will change its name to Pfizer”, he said.
The businesses of Pfizer and Allergan will be combined under Allergan, which will be renamed Pfizer. It said it will likely relocate its global headquarters from NY to Ireland, a move that will cut the drug giant’s USA tax burden. They say they can not remain competitive if they have to pay tax on profits at the relatively high USA top rate of 35 per cent. At the time we close the transaction, we will have over 40,000 employees across 25 states…
President Obama has called inversions “unpatriotic”. It would be the sector’s biggest deal, topping Pfizer’s 1999 acquisition of Warner-Lambert for $111.8 billion. The Allergan-Pfizer merge has made 2015 the most robust year in terms of merger activity in history – despite its tricky structure as a reverse merger. “We continue to explore additional ways to address inversions – including potential guidance on earnings stripping – and we intend to take further action in the coming months”, Lew said in the announcement.
Merger and acquisition activity worldwide surpassed $4 trillion as of Thursday, for only the second time since Thomson Reuters began keeping records in 1980.
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The new merging will also focus on two separate aspects, one to focus on new breakthroughs and the other to market the existing ones.
