Pfizer buy Allergan in $160 billion deal

Pfizer to buy Allergan in $160 billion deal

12:13 PM, 27th November 2015
Pfizer to buy Allergan in $160 billion deal

NEW YORK CITY, US: Pfizer Inc said that it is in talks to buy Allergan Plc in a deal worth $160 billion, the combined company will be known as Pfizer Plc. Brent Saunders,CEO of Allergan will become president and CEO of the combined company, with oversight of all commercial businesses.

The acquisition would create the world’s largest drug maker and shift Pfizer’s headquarters to Ireland. It would also be the biggest-ever instance of a US company re-incorporating overseas to lower its taxes.

Allergan would be the fourth huge acquisition over the last 15 years for Pfizer, following purchases of Warner-Lambert, Pharmacia and Wyeth. This also caps a record year for healthcare mergers and acquisitions, taking their cumulative value in 2015 to more than $600 billion.

US President Barack Obama called such inversion deals unpatriotic and has tried to crack down on the practice.

It was not immediately known how many jobs would be lost as a result of the merger.

Shares of Allergan fell 3.4 percent and Pfizer closed down 2.6 percent as investors learned the merger, under discussion since late October, would bring lower cost savings than they had hoped.

The US Treasury, concerned about losing billions in tax revenue, has been taking steps to limit the benefits of tax inversion deals, but it admitted last week that it would take legislation from Congress to stop such moves.

The deal enhances Pfizer’s faster-growing branded products business, with additions like Botox, and its older established products unit. Still, investors had hoped Pfizer would sell off the lower-margin business in 2017, a move now put off by the time required to integrate Allergan.

“The merger would give it enhanced access to its tens of billions of dollars parked overseas and allow for more share buybacks, dividend payments and business development. The combined company would have annual sales of about $64 billion,” Pfizer said.

The deal is expected to close in the second half of 2016.

“The company had estimated it would pay about 25 percent in corporate taxes this year, compared with about 15 percent for Allergan. It is expecting a combined tax rate of 17 percent to 18 percent by 2017,” said Frank D'Amelio, CFO, Pfizer.

“The combination would provide access to about 70 additional worldwide markets for Allergan products, such as Botox wrinkle treatment, Alzheimer's drug Namenda and dry-eye medication Restasis,” said Saunders.

Allergan and Pfizer estimated their merger would increase earnings per share by 10 percent, excluding special items, in 2019 and add by a high-teens percentage rate in 2020.

The deal values Allergan shares at $363.63 each, about 16 percent more than their closing price of $312.46. The record-breaking deal includes $8 billion in debt, Pfizer said.

© Reuters News



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