Pfizer to buy Allergan for record $160 billion

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Pfizer (PFE) announced Monday it will buy Allergan (AGN) for $363.63 a share, or about $160 billion in the biggest deal ever in the health sector. The transaction will allow the New York-based drug giant to relocate to Ireland to cut its U.S. tax burden.

The deal represents a premium of over 30 percent based on the companies’ unaffected shares price as of Oct. 28, Pfizer and Allergan said in a joint statement.

“Through this combination, Pfizer will have greater financial flexibility that will facilitate our continued discovery and development of new innovative medicines for patients, direct return of capital to shareholders, and continued investment in the United States, while also enabling our pursuit of business development opportunities on a more competitive footing within our industry,” Pfizer Chief Executive Ian Read said.

Allergan shareholders will receive 11.3 shares of the combined company — Pfizer PLC — for each Allergan share, while current Pfizer shareholders will receive one share of the new company for each share they own.

The deal, the largest ever in the health care sector, is expected to close in second half of next year.

It is also sure to draw political ire in a U.S. presidential election year because Pfizer would redomicile to Ireland, where Allergan is registered, in a so-called “inversion” that would slash its corporate tax rate.

“Given the price tag we’re seeing them pay for Allergan, I think it’s tough to justify without the tax benefits. There’s a bit of strategic overlap; there would be some accretion and it adds to Pfizer’s growth, but it really is that tax benefit at the end of the day that Pfizer’s been very vocally pushing for,” Vamil Divan, an analyst at Credit Suisse, told CNBC’s “Squawk Box.”

It also reignites debate in the pharmaceutical industry over the role of research and development, with Allergan Chief Executive Brent Saunders, a prolific dealmaker and a skeptic of in-house drug discovery, joining the combined company in a position to influence its strategy.

“The combination of Allergan and Pfizer is a highly strategic, value-enhancing transaction that brings together two biopharma powerhouses to change lives for the better,” Saunders said.

Pfizer’s Read, 62, will be CEO of the combined company, with Allergan’s Saunders, 45, serving in a very senior role focused on operations and the integration.

Saunders will also have a seat on the combined company’s board.

Fred Imbert

Reuters contributed to this report.

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