And although Read is something of an evangelist for tax reform – who has long promised that Pfizer would consider an inversion – he also pointed out that “we’re not doing this simply as a tax transaction”, noting that the company gets a way to grow in the USA and overseas with the deal. Annual revenue at the combined companies will be at about $65 billion, drawn from drugs, including Pfizer’s pneumonia vaccines and Botox, the wrinkle smoother made by Allergan.
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Indeed, Pfizer expects to see a new tax rate of between 17 to 18 percent, which is less than what their corporate tax rate of 25 percent is now.
The companies say the deal marks a 30% premium on Pfizer’s and Allergan’s unaffected share prices as of October 28th.
Shares in both companies declined following the deal’s confirmation. PFE is down on the day $0.84, or 2.61%, to $31.34 per share as of 9:46 AM ET, and AGN is down $8.71, or 2.79%, to $303.75 per share as of 9:46 AM ET.
Ian Read, Pfizer’s Chairman and CEO, will serve as Chairman and CEO of the combined company while Allergan CEO Brent Saunders will serve as President and Chief Operating Officer of the combined company, the statement said.
Reports suggest Pfizer will offer 11.3 of its shares for each Allergan share.
As expected, the deal will allow Pfizer to perform a tax inversion and domicile in Allergan’s official homeland of Ireland, which will lead Pfizer to rename itself Pfizer PLC at the expected close of the deal in about nine months.
While Pfizer may be enhancing the rapidly moving brands of Allergan, it may soon take a different course of action in the future.
For the deal to go forward, the companies will have to receive approval from antitrust regulators around the world. Pfizer’s shares had fallen 9.2 percent.
Pfizer stated in the company’s press release it will start a $5 billion accelerated share buyback program in the first half of 2016. Its product portfolio is to run from Viagra, Celebrex and pneumonia drugs to Botox and the cosmetic treatment Juvederm.
Gustav Ando, research director for IHS Life Sciences, a business information and consulting company, said that he thought the deal was carefully structured and likely to be approved, but added that it may receive even more scrutiny due to the current public and political outrage over high drug prices for the pharmaceutical industry.
The NY Times has more detail on the imminent deal and on United States attempts to stamp out corporate inversions.
Allergan is the result of a number of mergers in quick succession. In 2012, Watson acquired Swiss rival Actavis Group and adopted that name.
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Last year, several such inversion deals fell apart and sparked scrutiny of corporate tax loopholes.
