The pharmaceutical major Pfizer Inc. (NYSE:PFE) and Allergan plc (NYSE:AGN) the maker of Botox on Monday announced the merger of the two companies in a $160 billion stock deal. The complex all-share deal — the largest ever in the health sector– will also allow New York-based Pfizer to shift its base to Ireland in a corporate strategy called inversion, a maneuver that allows Pfizer to save millions in the U.S. taxes.
Pfizer, the maker of Viagra and Lipitor agreed to pay $363.63 a share to Allergan shareholders which represent 30 percent premium over the closing price of Pfizer shares at $32.18 on November 20, 2015, when the news came out that two companies were in talks. The transaction represents more than a 30 percent premium based on both the companies’ unaffected share prices as of October 28, 2015.
According to the deal, Allergan shareholders will receive 11.3 shares of the combined company for each of their Allergan shares, and Pfizer stockholders will receive one share of the combined company for each of their Pfizer shares, the companies said in a news release.
“The proposed combination of Pfizer and Allergan will create a leading global pharmaceutical company with the strength to research, discover and deliver more medicines and therapies to more people around the world,” Ian Read, Chairman and Chief Executive Officer, Pfizer said.
Pfizer’s Read will be the CEO of the new entity while Allergan’s CEO Brent Saunders will be the chief operating officer of the company.
“Joining forces with Pfizer matches our leading products in seven high-growth therapeutic areas and our robust R&D pipeline with Pfizer’s leading innovative and established businesses, vast global footprint and strength in discovery and development research to create a new biopharma leader,” Saunders said.
The merger deal happens at a time of the U.S. government’s discouragement of the practice of inversion as unpatriotic. The practice allows companies to shift their corporate base to countries that have lower tax rates than the U.S. In this case, the Ireland-based Allergan, the smaller of the two companies will technically buy the bigger firm Pfizer, justifying the shifting of the corporate office to Ireland.
The U.S. has one of the highest corporate tax rates at 35 percent while Ireland levies just 12.5 percent corporate tax on its companies.