Pfizer, the maker of Viagra and Lipitor, has struck a deal to buy Botox-maker Allergan in a transaction valued at about $160 billion, creating the world’s biggest drugmaker.
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It’s the biggest health-care deal ever and the largest so-called “inversion” in history, a tax-saving strategy in which a US company reorganizes in a country with a lower corporate tax rate.
U.S. President Barack Obama has called inversions unpatriotic and has tried to crack down on the practice.
Pfizer stockholders will have the option of receiving one share of the combined company for each of their Pfizer shares or receive cash, provided the aggregate amount of cash to be paid is not less than $6 billion or more than $12 billion. Shareholders in Irish-based Allergan will receive 11.3 shares of the combined company for each of their shares.
Just last Thursday, the Treasury Department announced further steps to block companies from undertaking transactions based on “a desire to shift the tax residence of a parent entity to a low tax jurisdiction simply to avoid USA taxes”.
Provided the deal receives approval from shareholders and regulators, the merged company will be listed on the NY Stock Exchange and trade under Pfizer’s current PFE ticker. All 11 of Pfizer’s directors will serve on the board of the combined business, along with four Allergan directors. “Through this combination, Pfizer will have greater financial flexibility that will facilitate our continued discovery and development of new innovative medicines for patients, direct return of capital to shareholders, and continued investment in the United States, while also enabling our pursuit of business development opportunities on a more competitive footing within our industry”, said Ian Read Chief Executive Officer, Pfizer.
This means the combined company will officially be domiciled in Ireland.
The tax aspect of the deal has been seen as critical.
Many industry analysts and investors believe Pfizer could be bulking up with Allergan’s fast-growing brands as a prelude to splitting by 2017 into two companies – one selling high-margin branded drugs and one selling low-cost generics that have dragged down Pfizer results over the past few years.
The deal is also expected to deliver cost savings of more than $2bn (£1.3bn) within the first three years of completion.
Mr. Saunders was CEO of Forest Labs, and became CEO of Actavis after that deal.
And unlike large drugmakers who conduct costly discovery research, Saunders has said that it makes more sense economically to acquire medicines that have already shown promise in human trials.
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Pfizer shares closed little changed on Friday at $32.18, while Allergan’s rose 3.4 percent to $312.46, both on the NY Stock Exchange.
