November 23, 2015•Update: November 23, 2015
ANKARA
Drug manufacturers Pfizer and Allergan have signed a $160 billion deal that will create the world's largest pharmaceuticals company, the two companies announced in a statement Monday.
The takeover of Ireland-based Allergan by the New York-based Pfizer, to be called Pfizer Inc., will create the world's biggest drug maker, Morningstar analyst Damien Conover said in a note on the Morningstar website Monday.
Allergan stock was valued at $363.63 per share for the transaction. Pfizer shareholders will receive 1 share of the new company per each share owned, while Allergan shareholders will receive 11.3 shares.
"Cost-cutting, tax opportunities, and oncology synergies are the motivating factors for Pfizer," Conover commented.
But it will also move Pfizer’s headquarters out of the U.S., relocating one of the largest American companies to a foreign country for tax advantages, Conover said.
The deal will be structured as a "reverse merger", with Allergan, which is smaller, officially "acquiring" New York-based Pfizer. This will save the companies a large sum in taxes, he said.
"Allergan already is incorporated in Ireland, which is an attractive jurisdiction from a tax perspective," wrote Cowen analyst Steve Scala in a note published on StreetInsider.com on Nov. 20.
There is no need for Pfizer/Allergan to utilize a new holding company in a third country to enjoy the tax advantages related to an Irish jurisdiction, even under new rules announced covering this kind of deal by the U.S. Treasury on Nov. 19.
Pfizer Chief Executive Ian Read is to be at the head of the merger, and Allergan Chief Executive Officer Brent Saunders will also be on the board. Most top executives at the new firm are expected to stay with the company.
Total market value for the merger will be greater than $300 billion, based on current stock prices. At that size, it would be larger than the U.S.-based Johnson & Johnson, which is currently the world’s largest pharmaceutical group. Annual revenue at the combined companies will be at about $65 billion, drawn from drugs, including Pfizer’s pneumonia vaccines and Botox, the wrinkle smoother made by Allergan.
Allergan also has four oncology drugs in development which will match projected products at Pfizer.
The move comes in a year that has seen about $280 billion in mergers and acquisitions in the pharmaceuticals industry, Morningstar said.
The deal will be subject to regulatory approval both in the U.S. and in Europe.
