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AGN Allergan plc

193.02
0.00 (0.00%)
Last Updated: 00:00:00
Delayed by 15 minutes
Share Name Share Symbol Market Type
Allergan plc NYSE:AGN NYSE Common Stock
  Price Change % Change Share Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 193.02 0 00:00:00

Pfizer and Allergan Strike $155 Billion Inversion Deal--3rd Update

23/11/2015 1:23pm

Dow Jones News


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By Jonathan D. Rockoff, Dana Mattioli and Lisa Beilfuss 

Pfizer Inc. and Allergan PLC said Monday that they would merge in a so-called inversion deal worth about $155 billion that would create the world's biggest drug maker by sales.

The takeover would be the largest inversion ever, moving one of the top names in corporate America to a foreign country. Such deals enable a U.S. company to move abroad and take advantage of a lower corporate tax rate elsewhere, and have remained popular in the face of U.S. efforts to curb them.

The Wall Street Journal had reported the companies were on the cusp of a deal, with terms having been hammered out, on Sunday.

To help secure a lower tax rate, the businesses of Pfizer and Allergan will be combined under Allergan, which will be renamed Pfizer PLC and trade under the ticker symbol PFE, Pfizer's current symbol, on the New York Stock Exchange.

Pfizer expects the combined firm to have an adjusted tax rate of between 17% and 18%, lower than its current 25% rate, among the highest in the industry.

Under terms of the deal, the companies will exchange 11.3 Pfizer shares for every Allergan share, and the deal also contains a cash component between $6 billion and $12 billion. The companies said the deal represents a roughly 30% premium to Allergan's closing price Oct. 28, the day The Wall Street Journal reported the companies were in talks. After the deal, former Pfizer shareholders will own about 56% of the combined company.

Pfizer and Allergan said the enterprise value of the deal, which often includes debt, is $160 billion. It is expected to close in the second half of 2016.

Shares in both companies declined following the deal's confirmation. Allergan's stock fell 1.6% to $307.55 and Pfizer's stock fell 1.2% to $31.80.

Pfizer Chief Executive Ian Read will lead the combined company, with Allergan CEO Brent Saunders serving as operating chief. The combined board will include all 11 current Pfizer directors and four current Allergan directors.

Mr. Read has railed against high U.S. corporate tax rates, which he says puts American-based companies like Pfizer at a competitive disadvantage to their overseas rivals.

The deal enables "our pursuit of business-development opportunities on a more competitive footing within our industry," Mr. Read said in a news release Monday.

The deal comes days after the Treasury Department released new rules aiming to curb tax-lowering inversion deals. Analysts said the rules didn't appear to be able to thwart a combination of Pfizer and Allergan, though the risk of government action remains.

For the deal to go forward, the companies will have to receive approval from antitrust regulators around the world.

The deal will be neutral to Pfizer's adjusted per-share earnings in 2017, add modestly to them in 2018 and boost them by about 10% in 2019. By 2020, Pfizer expects the transaction to increase adjusted profit by a high-teens percentage.

Pfizer said it expects to buy back about $5 billion in shares in the first half of next year under an accelerated program.

The merger will create a pharmaceutical behemoth, with top-selling products including Pfizer's Prevnar pneumonia vaccine and Allergan's anti-wrinkle treatment Botox and industry-topping R&D budget. The company's drugs and vaccines would cover a range of diseases, from Alzheimer's to cancer, eye health to rheumatoid arthritis.

The deal brings together two pharmaceutical powerhouses with more than $60 billion in combined sales. Last year, Actavis, which bought Allergan and took its name, had more than $13 billion in sales, while Pfizer had nearly $50 billion in revenue.

Aside from giving Pfizer the opportunity to lower its corporate tax rate, the deal would increase its sales growth. For Allergan, meantime, a combination will allow it to take sales, which are predominantly in the U.S., to other international markets.

Allergan is the result of a number of mergers in quick succession. It started off as a company called Watson Pharmaceuticals Inc. In 2012, Watson acquired Swiss rival Actavis Group and adopted that name. It also absorbed Warner Chilcott PLC and Forest Laboratories Inc. in multibillion-dollar deals.

Mr. Saunders was CEO of Forest Labs, and became CEO of Actavis after that deal. Shortly after, Allergan's predecessor was put into play when Valeant Pharmaceuticals International Inc. made an unsolicited offer to buy the California company. Actavis then stepped in as a white knight and bought Allergan, taking the company's name.

Allergan in July agreed to sell its generics business to Israel's Teva Pharmaceutical Industries Ltd. for more than $40 billion.

Pfizer and Allergan said that after the deal closes, the combined company will decide on splitting into two businesses, one focused on patent-protected products and the other on drugs that have lost their patent protection or are close to losing it. It expects to make that decision by the end of 2018.

Write to Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com, Dana Mattioli at dana.mattioli@wsj.com and Lisa Beilfuss at lisa.beilfuss@wsj.com

 

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


(END) Dow Jones Newswires

November 23, 2015 08:08 ET (13:08 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.

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