The $160 billion (£105.8 billion) merger, officially announced Monday, will allow Pfizer to move its executive offices to Ireland, thus lowering its tax rate, while also morphing into the world’s largest drug maker. This represents a premium of more than 30% and brings the acquisition value to a total of $160 billion.
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Pfizer said it did not plan to change its dividend policy of paying out roughly half of an adjusted measure of earnings per share and would continue with its planned 5 billion share buyback in the first half of 2016.
Pfizer’s bid for Allergan – if approved – will be the healthcare sector’s biggest ever deal.
Allergan shareholders will end up owning about 44% of the combined company, which should steer it clear of the new U.S. Treasury guidelines last week attempting to tighten the rules on such tax-inversion deals.
Sen. Charles Schumer, D-N.Y., a member of the Senate Finance Committee, called Pfizer’s move “truly disturbing”, given how the company has benefited from federally funded research and infrastructure.
The agreement between the American and Irish companies utilizes a controversial tax-saving strategy.
Pfizer’s Chief Executive Ian Read, 62, will be CEO of the combined company, with Allergan’s Saunders, 45, serving in a very senior role focused on operations and the integration, the people added.
The deal will technically see Dublin-based Allergan buying its much larger partner. He also expects the FTC will investigate the deal.
It would be the biggest merger of the year, topping beer maker Anheuser-Busch InBev’s (ABI.BR) proposed $107 billion takeover of SABMiller Plc (SAB.L).
Pfizer will redomicile to Ireland – where Allergan is registered – in a so-called “inversion” that will slash its corporate tax.
Under terms of the deal, the companies will exchange 11.3 Pfizer shares for every Allergan share, and the deal also contains a cash component between $6 billion and $12 billion.
“The Pfizer-Allergan merger is fundamentally unfair, and a prime example of how our capitalist economy is not supposed to work”, he said in a statement.
The U.S. Treasury, concerned about losing tax revenue, has been taking steps to clamp down on tax inversion deals.
Pfizer media relations director MacKay Jimeson confirmed the video was developed and launched without assistance from an outside firm, but did not comment further. Pfizer said that with the merger they will have a greater flexibility in their finances that will help them to keep discovering and developing new and innovative medications and provide a better return to their shareholders.
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Allergan itself has been recently transformed, created through an acquisition by Actavis that kept the Allergan name.
