Pfizer has clinched a blockbuster merger with a fellow drugmaker, one worth more than US$150 billion, that can best be described in superlatives.
The deal to buy Allergan, the maker of Botox, is to be one of the biggest-ever takeovers in the healthcare industry and is the largest acquisition yet in a banner year for mergers.
It is also to be the biggest transaction aimed at helping a US company shed its US corporate citizenship in an effort to lower its tax bill, in this case by billions of US dollars.
Although Pfizer is significantly bigger, with a market value of US$199 billion to Allergan’s US$123 billion, it is Allergan that is technically to be the buyer, according to people briefed on the matter.
Pfizer is to lead the combined company, which is to surpass Johnson & Johnson as the biggest drugmaker by revenue, with more than US$60 billion in sales. Its product portfolio is to run from Viagra, Celebrex and pneumonia drugs to Botox and the cosmetic treatment Juvederm. Analysts do not expect the merger to have much effect on the prices of the companies’ drugs.
Pfizer’s chief executive, Ian Read, is to hold onto that role at the combined company, the people said. His counterpart at Allergan, Brent Saunders, is expected to take a top deputy role and a board seat.
The boards of both Pfizer and Allergan on Sunday voted to approve the transaction, one of the people briefed on the matter said. News of the votes was reported yesterday by the Wall Street Journal.
Representatives for Pfizer, Allergan and the US Department of the Treasury declined to comment.
Adopting Allergan’s home base of Ireland would yield significant savings for Pfizer, one of the oldest drugmakers in the US. Its history runs from producing painkillers during the Civil War to penicillin in World War II. Pfizer’s tax rate last year was roughly 26.5 percent and is expected to be about 25 percent this year.
Its prospective merger partner, by contrast, reported a tax rate of just 4.8 percent for last year, though its rate this year is about 15 percent.
Pfizer must pay US corporate taxes on the billions of US dollars in earnings from international operations if it ever tries to bring the money back to the US. He had already tried once to shift Pfizer’s home abroad, pursuing a US$119 billion takeover bid for AstraZeneca of the UK.
That campaign faltered amid fervent opposition from AstraZeneca and raised the hackles of lawmakers in the US and the UK.
However, Read, an accountant by training, has pressed ahead with his dream of a corporate inversion.
Otherwise, Pfizer would be fighting “with one hand tied behind our back,” he told the Wall Street Journal last month.
Under the terms of the proposed deal, Allergan shareholders are to receive 11.3 Pfizer shares for each of their holdings, the people briefed on the matter said.
That is worth about US$363.63 per share, or 16 percent higher than Allergan’s closing price on Friday.
The transaction would also include a cash component, though one of the people described it as less than 10 percent of the deal’s overall value.
Pfizer shareholders are still to own the majority of the combined business.
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