News of the potential merger had an immediate effect, causing shares of Allergan to go up 8 percent, while Pfizer’s stocks traded sideways, according to CNN.
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Shares in both companies were halted in morning trading. “The hurdle will really be the price”.
Analysts have been speculating on where Pfizer might turn its gaze ever since the USA company’s $119 billion bid for UK-based AstraZeneca PLC (AZN) collapsed in May 2014.
“Pfizer desperately needs a large acquisition and the resulting synergies to reinvigorate its tepid earnings growth rate”, said Maxim Jacobs at Edison Investment Research.
The pushback began nearly immediately. Acquiring Ireland-based Allergan would allow Pfizer to pull off a so-called inversion, shifting its corporate home to that nation and cutting its tax bill a few $2 billion a year. “It will take legislation to effectively combat this disturbing trend”.
Joan Campion, a spokeswoman for Pfizer, said the company does not comment on speculation. Its shares jumped 6 percent closing at $304.38 on Thursday.
The talks were first reported in the media late on Wednesday.
Pfizer CEO Ian Read acknowledged Thursday at an event with the Wall Street Journal that the push for the deal was driven largely by tax considerations. The Botox-maker’s revenue is seen increasing 39 percent this year, according to Thomson Reuters I/B/E/S estimates.
Moody’s Investor Service said the deal would have “credit positive implications for both companies”.
In the case of Pfizer, it reported an effective tax rate of about 25 percent in its most recent filing. Democrats, meanwhile, favor tougher rules that would stop US companies from pursuing these deals to lower their tax liability. He states that the main goal is to add value for shareholders, and that the company could either do a development deal, split, or remain as one.
Allergan will give Pfizer, whose revenues are expected to slide 3.3 per cent this year, a boost in top-line growth.
Allergan, which makes Botox, jumped 8 percent after saying it has held talks with Pfizer about a sale. Allergan’s portfolio of biosimilars (imitations of pricier brand-name medications) is attractive, but has a lot of overlap with the drugs Pfizer gained in the purchase of Hospira and could have to be divested. Actavis itself inverted to Ireland when it acquired Warner Chilcott in 2013.
Allergan is itself the result of an acquisition earlier this year.
The two companies said on Thursday that they were in “preliminary friendly discussions”.
Icahn, whose estimated net worth is $22 billion, last week revealed plans to put $150 million into a new super-PAC that would push for legislation to discourage tax inversions. It is also approved for several medical uses. A deal would run north of US$100 billion (RM428 billion) in value and be the biggest of the year.
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Two of the nation’s three largest drugstore chains, Walgreens Boots Alliance Inc. and Rite Aid Corp., announced a $9.4 billion merger Tuesday.
