World Bulletin / News Desk
Drug manufacturers Pfizer and Allergan are close to a $150 billion deal that would create the world's largest pharmaceuticals company, research consultancy Morningstar reported on Monday.
The takeover of Ireland-based Allergan by the New York-based Pfizer would create the world's biggest drug maker, Morningstar analyst Damien Conover said in a note on the Morningstar website on Monday.
“Cost-cutting, tax opportunities, and oncology synergies are the motivating factors for Pfizer,” Conover commented.
But it would also move Pfizer’s headquarters out of the U.S., relocating one of the American largest companies to a foreign country for tax advantages, Conover said.
An announcement is expected in the early morning in the U.S. ahead of opening of the stock market.
The deal will be structured as a “reverse merger,” with Allergan, which is smaller, officially “acquiring” New York-based Pfizer. This will save the companies a large sum in taxes, he said.
"Allergan already is incorporated in Ireland, which is an attractive jurisdiction from a tax perspective," wrote Cowen analyst Steve Scala in a note published on StreetInsider.com on Nov. 20. There is no need for Pfizer/Allergan to utilize a new holding company in a third country to enjoy the tax advantages related to an Irish jurisdiction, even under new rules announced covering this kind of deal by the U.S. Treasury on Nov. 19.
Pfizer Chief Executive Ian Read is reportedly to be at the head of the merger, and Allergan Chief Executive Officer Brent Saunders will also be on the board. Most top executives at the new firm are expected to stay with the company.
Total market value for the merger would be greater than $300 billion, based on current stock prices. At that size, it would be larger than the U.S.-based Johnson & Johnson, which is currently the world’s largest pharmaceutical group. Annual revenues at the combined companies would be at about $65 billion, drawn from drugs, including Pfizer’s pneumonia vaccines and Botox, the wrinkle smoother made by Allergan.
Allergan also has four oncology drugs in development which will match projected products at Pfizer.
The move comes in a year that has seen about $280 billion in mergers and acquisitions in the pharmaceuticals industry, Morningstar said.
The deal will be subject to regulatory approval both in the U.S. and in Europe.