Pfizer, the largest USA drugmaker, has also been suggested as a possible acquirer of GlaxoSmithKline and Shire.
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Traders gather as NYSE Floor official Rudy Mass (centre) opens Pfizer’s stock on the floor of the New York Stock Exchange October 29, 2015.
There is, however, still a fair amount of risk involved in tax inversions, given USA legislators pushback against certain headline deals.
“These corporate inversions take capital and, more importantly, jobs offshore”, he said in a statement. CEO Brent Saunders’ company-rebranded as a “growth pharma” when it struck the transformative Actavis-Allergan deal last year-said in its second-quarter earnings presentation that it was expanding at a rate of 10%, faster than the 6% operational growth Pfizer posted in Q3, the WSJ points out. It will be interesting to monitor any near-term commentary from the Obama administration, the US Treasury and/or from the leading candidates for the 2016 Presidential Election to see how they react to this morning’s news and how that might impact the likelihood of a deal being completed.
As per recent report by the Wall Street Journal, Pfizer is approaching Allergan Plc to sign a deal which would be among the largest in the history of the drug industry. “I am fighting with one hand tied behind my back”.
Pfizer investors were more cautious – perhaps fearing a political backlash over any attempt to move Pfizer’s tax base offshore.
The legal framework was changed in the wake of Pfizer’s failed £69bn takeover of United Kingdom rival AstraZeneca past year.
The development comes in a week when the new executives and Board of Allergan were on their first visit to Westport, where it is understood they were very impressed with their company’s state-of-the-art campus on the Castlebar Road (which includes a brand new $350 million biologics manufacturing facility). “The hurdle will really be the price”.
A tax inversion is being discussed in the current talks, a person familiar with the matter told Reuters. In its pursuit of AstraZeneca, Pfizer had hoped to employ such a strategy. There’s no deal yet, and it looks like one would be about tax inversion.
Talks between Pfizer and Allergan raised the prospect of a mega-merger in the pharmaceutical industry on Thursday as the broader U.S. stock market finished slightly lower.
Allergan, which confirmed the talks, now has a market capitalization of almost $113 billion.
Unfortunately, my warnings concerning the fact that there will be a large number of our companies leaving the country within the next year is already coming true.
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Based on Wednesday’s market value, Allergan is worth well over $110 billion. But if you throw a dart and assume Pfizer would buy Allergan at, say, a 20% premium…well, that’s well over $130 billion. It’s done three sizeable deals since 2000, acquiring Warner-Lambert and Pharmacia before paying a whopping $68 billion for Wyeth in 2009. Pfizer and other big companies seem to be running out of ways to increase near-term earnings for impatient shareholders, so the only thing left to do are mega-deals. It is not known how many cuts would result from a tie-up with Allergan.
