As expected, Pfizer has clinched its takeover of Botox-maker Allergan for $160 billion, the biggest pharmaceuticals deal in history.
After weeks of speculation, the two companies are creating the world’s biggest drugmaker by sales called Pfizer plc. The transaction represents more than a 30% premium based on Pfizer’s and Allergan’s unaffected share prices as of October 28, and the latter’s stockholders will receive 11.3 shares of the combined company of reach one they currently own.
Pfizer boss Ian Read will be chief executive and chairman of the merged company, with Allergan head Brent Saunders becoming president and chief operating officer. Mr Read said the deal creates “a leading global pharmaceutical company with the strength to research, discover and deliver more medicines and more therapies to more people around the world”.
Mr Saunders said: “This bold action is the next chapter in the successful transformation of Allergan, allowing us to operate with greater resources at a much bigger scale.”
Importantly, the merged company will maintain Allergan’s Irish domicile, which means the profits of the new company would be subject to corporation tax of 12.5%, much lower than the 35% Pfizer is subject to in the USA. The deal was criticised by presidential candidate Hillary Clinton who said it will leave “US taxpayers holding the bag” – she is proposing steps to prevent tax inversions.
Pfizer, which expects to achieve $2 billion in cost savings, is also already considering splitting the combined company in two by 2018. One business would focus on newer products, with the other focusing on off-patent drugs.
The new entity is expected to generate annual operating cash flow in excess of $25 billion beginning in 2018 and Pfizer noted that it will have a pipeline of more than 100 mid-to-late stage programmes in development.