On Sunday, the boards of drugmakers Allergan and Pfizer approved a $150 billion merger agreement that would make the combined company the largest drugmaker, by revenue, in the world, the New York Times‘ “Deal B%k” reports (de la Merced, “Deal B%k,” New York Times, 11/22).
The deal is subject to approval by antitrust regulators throughout the world, according to the Wall Street Journal.
Under the agreement, Dublin-based Allergan, the smaller of the two companies, would purchase New York-based Pfizer, according to individuals briefed on the matter (Rockoff/Mattioli, Wall Street Journal, 11/22). The insiders said Allergan shareholders would receive 11.3 Pfizer shares for each of their holdings under the deal. The agreement would also include a cash component, the insiders said (“Deal B%k,” New York Times, 11/22).
Pfizer CEO Ian Read would head the combined company, while Allergan CEO Brent Saunders would serve as company’s president and COO, according to those briefed on the matter (Wall Street Journal, 11/22).
If the deal is approved, the combined company would unseat Johnson & Johnson as the world’s largest drugmaker by revenue, according to the Times. Together, Pfizer and Allergan generate more than $60 billion in sales. Analysts do not expect the merger to significantly affect the prices of the companies’ products (“Deal B%k,” New York Times, 11/22).
Deal Would Mark Largest Cooperate Inversion
The deal would mark the largest corporate inversion to ever occur, according to the Journal. Inversions occur when U.S.-based companies move to a country with a lower corporate tax rate (Wall Street Journal, 11/22). Under current rules, Pfizer has to pay U.S corporate taxes on revenue generated from international operations if it returns such revenue to the U.S. Pfizer’s tax rate this year is expected to be about 25%, while Dublin-based Allergan’s is predicted to be about 15% (“Deal B%k,” New York Times, 11/22). According to Modern Healthcare, Pfizer could see its tax rate drop to between 17% and 18% under the merger (Modern Healthcare, 11/22).
Maxim Jacobs, an analyst at Edison Investment Research, said, “Allergan would help Pfizer escape the uncompetitive U.S. corporate tax rate, which has led company after company to domicile away from its shores” (Kutscher, Modern Healthcare, 11/20).
Read on Monday said the combined company would give Pfizer greater financial flexibility to develop new treatments. He noted that the proposed merger would also give Pfizer a more “competitive footing within the industry.” He added that the company would still invest in the U.S. market.
Meanwhile, Saunders said the proposed merger “matches … [Allergan’s] robust research and development with Pfizer’s leading innovative and established businesses, vast global footprint and strength in discovery and development research to create a new biopharma leader” (Modern Healthcare, 11/22).