Allergan PLC and Pfizer Inc. confirmed Thursday that they are in talks about a potential combination, in what would be a blockbuster merger capping off a torrid stretch for health-care and other takeovers.
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“Our tax rate highly disadvantages American multinational high-tech businesses”, Read said at a Wall Street Journal event.
If Pfizer goes forward, given Allergan’s market capitalization of about $113 billion before deal talks surfaced, it would be the biggest buyout of the year, more expensive even than Anheuser Busch InBev’s $106 billion bid for SABMiller.
S&P 500 companies that have greater market caps include Apple, Microsoft, ExxonMobil and Google parent Alphabet (class A and class C combined).
There has already been close to $850 billion worth of deals in the sector made this year, as cash-rich companies either try to fix their pipelines or save on USA taxes by doing a tax inversion, where they exploit loopholes in America’s tax system by buying smaller rivals based overseas and redomiciling themselves. Pfizer had previously approached Actavis PLC-the precursor company to Allergan which purchased the Irvine drug maker this year for more than $72 billion and took its name. But if you throw a dart and assume Pfizer would buy Allergan at, say, a 20% premium…well, that’s well over $130 billion. The move, called tax inversion, requires a large foreign target for a company to circumvent US tax rules. Combining the two would displace Johnson & Johnson as the world’s biggest healthcare group.
“An acquisition of Allergan by Pfizer makes sense”.
The news sent Allergan shares up almost eight percent to $310.05, while Pfizer shares lost 2.2 percent to $34.61 in midday trade.
Pfizer has been working on several new products that could replace diminishing sales of patent-expired drugs like Lipitor and Celebrex, whose sales have dropped by 6 per cent and 31 per cent, respectively, worldwide past year. It’s done so at least three times since 2000, acquiring Warner-Lambert, Pharmacia and Wyeth, the last of which it paid a whopping $68 billion.
A takeover of Allergan could offer similar advantages given that the Botox maker is based in lower-tax Dublin.
If a deal were to be struck, it would add antiwrinkle treatment Botox, dry-eye treatment Restasis and other popular Allergan drugs to Pfizer’s arsenal of patent-protected medicines.
It also wouldn’t be the first time for Pfizer and Allergan.
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Allergan, itself the result of an acquisition earlier this year, is also slimming down by selling its generic-drug unit to Teva Pharmaceutical Industries Ltd for $40.5 billion.
