Drug giants Allergan and Pfizer have begun "preliminary friendly discussions" toward a merger, the companies have confirmed.
A merger, if it takes place, probably would be the biggest in a wave of massive pharma, healthcare and health insurance mergers of recent months. Allergan, which was approached by Pfizer, has a market value of more than $110 billion alone.
The merger would unite the companies responsible for such blockbuster drugs as Viagra, Celebrex, Lipitor, Botox, and Restasis.
How big is this? Well, in comparison, Tuesday's announcement of a proposed merger between Walgreens and Rite Aid was valued at $17.2 billion including acquired net debt. But if you throw a dart and assume Pfizer would buy Allergan at, say, a 20% premium...well, that's well over $130 billion. That's more than seven Wallgreens-Rite Aid deals.
The Wall Street Journal first reported the talks, which both companies subsequently confirmed. Allergan is headquartered in Dublin and a sale could offer Pfizer tremendous -- and likely, quite controversial -- tax advantages if Pfizer moved its corporate headquarters from New York to Ireland.
Pfizer CEO Ian Read brought up that issue last week at an executive breakfast sponsored by the Journal, saying Pfizer was competing "with one hand tied behind my back" because of US corporate tax rates. Reuters reports that Pfizer's effective tax rate is 24% and Allergan's is 15%.
The merger would make Pfizer the largest drugmaker in the world and continue the company's acquisitive spree of recent years. Thompson Reuters data indicates 2015 is a record year for healthcare dealmaking, already hitting $447.5 billion by early September and easily surpassing last year's record of $392.4 billion.