Pfizer, Allergan reportedly prepping record $150B merger ahead of new inversion rules
- Multiple media outlets reported on Wednesday that pharmaceutical giants Pfizer and Allergan are in advanced talks to propose a monster $150 billion merger, according to sources with knowledge of the discussions. Bloomberg reported that an announcement regarding a proposed deal could come as soon as Monday. Both companies have declined to comment on the matter so far.
- The deal would be structured as an all-stock offering in which Pfizer prices Allergan at between $370 to $380 per share, an approximate 23% premium over the Botox maker's closing price on Wednesday. Pfizer would also use such a merger to shift domicile to Ireland, where Allergan is headquartered, in order to gain a tax advantage.
- But there a number of issues complicating such a deal. On Wednesday, the U.S. Treasury Department sent a letter to lawmakers saying that it would be releasing new rules to further tighten conditions on tax-inversion mergers on top of an initial set of changes issued last year. That could delay a deal announcement and/or change the details of a proposed merger.
2015 has already been the biggest year for healthcare deals in history (right after a 2014 which shared the same distinction). But a Pfizer-Allergan alliance would be the biggest drug maker deal in history, far surpassing the Pfizer-Warner-Lambert or Glaxo Wellcome-SmithKline Beecham deals of 1999 and 2000.
It would also be sure to invite plenty of regulatory scrutiny. The White House and the Treasury Department have been eager to stem the tide of domicile-shifting inversion mergers, and the Treasury issued rules a little more than a year to make such arrangements more difficult. On Wednesday, the department announced that it would pursue even more regulations, although tax experts have noted that the Treasury may face trouble writing rules that prevent shifting profits offshore under current law.
There have also been reports that one condition for a deal announcement would involve making Allergan CEO Brent Saunders the chief executive of the combined company, rather than Pfizer's Ian Read. The merged firms would surpass Johnson & Johnson in sheer size and harbor a major portfolio of ophthalmology drugs, beauty products, and Pfizer flagships such as Viagra, Lyrica, Prevnar, and others.
If a deal is ultimately proposed and eventually cleared, it would also likely lead to thousands of job cuts as the companies seek to trim fat and redundancies from their payrolls.