New York-based Pfizer and Allergan, headquartered in Ireland, said Allergan shareholders will receive 11.3 shares in the combined company for each share held.
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The White House has long sought to curtail so-called tax inversions by large USA companies, which sees the businesses shift their headquarters overseas in order to take advantage of the favourable tax conditions in other jurisdictions. The US corporate tax rate of 35 percent is among the world’s highest, and compares with Ireland’s rate of 12.5 percent.
Ian Read, the CEO of Pfizer (NYSE:PFE), said in a statement that this merger with Allergan, Pfizer (NYSE:PFE) will have acquired more financial flexibility which would ensure it locating and developing new drugs for patients for better recovery, and at the same time, it would be able to provide huge returns to shareholders.
“On the political risk, we’ve assessed this deal looking at the present regulations, the new notices and all the information we can glean, and we believe this deal is a great deal for shareholders, both of Allergan and Pfizer”, Read said. Last year Pfizer made a bid to takeover rival AstraZeneca, but the United Kingdom drugs firm rejected the bid. President Barack Obama has called inversions unpatriotic and is pushing to crack down on deals, with limited success.
The merger, which will create the world’s largest drugmaker, will delay the Lipitor and Viagra maker’s decision on whether to split by two years to late 2018, Pfizer said.
Another drag on the stocks: concern that the USA government could try to thwart a combination that would move one of the top names in corporate America to a foreign country.
“But on a note of caution, Paul Heugh, chief executive of Skarbek Associates, said that while “$2bn of savings in the first three years, together with an attractive tax inversion sounds like a compelling reason for a merger, there is no getting away from the fact that less than half of deals fail to attain the objectives stated in the merger announcement”.
Pfizer investors will get one share of the new company for each of their shares or a portion of payment in cash from $6bn to $12bn.
The merger deal will pave the way for a new pharmaceutical giant as the combined companies are estimated to have an annual sales of $60 billion, thereby putting Merck & Co in the number two spot, with only $40 billion worth of annual sales. The former secretary of state has numerous ties with Pfizer, as they have donated over $39,000 to her presidential campaign and between $1 and $5 million to the Clinton Foundation.
Although the rebranding will be called Pfizer Plc, legally, the company’s combination will be under Allergan Plc.
The transaction represents more than a 30% premium based on Pfizer’s and Allergan’s unaffected share prices as of October 28, 2015, it added.
The acquisition was structured as Allergan buying Pfizer to avoid certain constraints.
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But in a recent interview, Saunders said he would be willing to put a higher emphasis on drug discovery if it makes sense for his company. The record-breaking deal includes $8 billion in debt, Pfizer said.
