The boards of Pfizer and Ireland’s Allergan on Sunday approved a merger deal worth $160 billion.
The deal, which combines cash and stock and is expected to close in the second half of next year, pending customary approval, would create the largest drugmaker by sales.
Pfizer, based in New York, would gain a lower tax rate by moving its business to Ireland through the transaction, a strategy known as inversion that has grownmore common among pharmaceutical companies. A prior attempt by Pfizer to strike an inversion deal failed when the company could not acquire Astra-Zeneca, which is based in London.
In an effort to take advantage of that lower tax rate, Pfizer and Allergan will be combined under Allergan, which will be renamed “Pfizer PLC.” Pfizer expects the combined firm would drop its current tax rate of 25% to an adjusted rate between 17% and 18%.
The tax-related deal activity has provoked a response from Washington where the Treasury Department has introduced new rules to make inversions less attractive.
Pfizer would pay 11.3 shares per Allergan share. Pfizer shareholders will own 56% of the combined company.
On Monday, Pfizer’s CEO Ian Read, who will remain as the leader of the combined company, said the deal would give Pfizer greater financial flexibility to innovate new treatments. He also said that it would allow the company to continue to invest in the United States while giving it a more “competitive footing within the industry.”
Allergan’s CEO Brent Saunders, who will become President and COO after the merger, likewise emphasized innovation in his statement regarding the deal.
“Joining forces with Pfizer matches…our robust research and development with Pfizer’s leading innovative and established businesses, vast global footprint and strength in discovery and development research to create a new biopharma leader,” he said.
The Pfizer/Allergan merger would boast a combined pipeline of more than 100 mid-to-late stage programs in development, according to the release.
Shares of the combined company will be listed on the New York Stock Exchange and trade under the “PFE” ticker, according to a press release.
Pfizer also listed as a condition of closing, Allergan’s pending divestiture of its generics business to Teva Pharmaceuticals. Allergan expects that will close in the first quarter of 2016.
Pfizer and Allergan together have more than $60 billion in sales.
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