Pfizer and Allergan are preparing to merge in a $160 billion deal that will create the world’s largest drug company.
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The Pfizer-Allergan deal is likely to fuel critics’ concerns that consumers would pay even more for drugs as competition declines among manufacturers, insurers and retailers.
Read will become the chief executive of the new Pfizer plc, while Allergan chief executive Brent Saunders will become chief operating officer, with oversight of all Pfizer and Allergan’s combined commercial businesses, manufacturing and strategy functions.
The front-runner for the Democratic presidential nomination in the November 2016 election said she will propose steps to prevent more inversions, but she did not provide details.
Pharmaceutical giant Pfizer’s $160bn (£105bn) merger with Allergan has been billed as one of the biggest tax inversion deals ever and will reduce its global tax rate from 25.5% to an estimated 17% or 18%.
Executives emphasised the benefits of marrying the two companies’ portfolios and research departments, achieving $2.8 billion in operational savings.
Read said, “Through this combination, Pfizer will have greater financial flexibility that will facilitate our continued discovery and development of new innovative medicines for patients”.
“While we understand the rationale for an “inversion” deal for Pfizer (and its eventual splitting into two companies), we think the rationale for Allergan is less compelling”.
The combination – the second-largest merger in history – could have ramifications around the globe, pushing up drug prices and spurring more such deals in the fast-consolidating health care sector and other fields.
US President Barack Obama meanwhile has called inversions unpatriotic. Shares of Allergan were down about 3.3% in the afternoon, close to where they traded for most of the day. Since the deal was announced on Monday morning, politicians including US Sen.
The tactic is primarily motivated by the disparity between the US’s high 35% corporate rate and the UK’s 20% rate, brought in by the coalition to attract additional business to the UK. It’ll also keep Pfizer’s CEO and stock symbol.
Perhaps anticipating the deal would draw fire, Pfizer CEO Ian Read sent a letter on Monday to senior senators.
Allergan shareholder are going to get 11.3 shares from the combined company for every share of theirs.
The transaction represents more than a 30% premium based on Pfizer’s and Allergan’s unaffected share prices as of October 28, 2015. Still, though, the changes “do not seem to materially impact” the Pfizer-Allergan hook-up, Bernstein analyst Tim Anderson wrote in a recent note to clients.
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After the transaction, Pfizer shareholders are expected to own about 56 percent of the combined company, with the remaining 44 percent owned by Allergan shareholders.
