Pfizer, Allergen merge in $160 billion deal to become No 1 drug firm

The proposed combination of Pfizer and Allergan will create a leading global pharma company

New York:

Viagramaker Pfizer and Botox manufacturer Allergan on Monday agreed to merge in a record $160 billion deal, creating a drug making behemoth, in the biggest buyout in the healthcare sector.

The deal will technically see Dublin-based Allergan buying its much larger partner. It will allow New York-based Pfizer to shift base to Ireland for tax purposes. Allergan shareholders will receive 11.3 shares in the combined company for each share held.

Pfizer investors will be able to opt for cash instead of stock in the combined company in exchange for their shares, provided the aggregate amount of cash to be paid is not less than $6 billion or more than $12 billion.

Ian Read, CEO of Pfizer will be chairman and CEO of the new company, while Allergan CEO Brent Saunders will be the president and chief operating officer, overseeing sales, manufacturing and strategy, the companies said on Monday.

The combined company is expected to generate annual operating cash flow in excess of $25 billion, beginning in 2018 with broadened innovative pipeline of more than 100 combined mid-to-late stage programmes in development.

As per the definitive merger agreement that has been approved by the boards of the two companies, Pfizer will combine with Allergan in a stock transaction currently valued at $363.63 per Allergan share, for a total enterprise value of approximately $160 billion, Pfizer said.

The transaction represents more than a 30 per cent premium based on Pfizer's and Allergan's unaffected share prices as of October 28, 2015, it added.

The coming together of New York-based Pfizer, which manufacturers medications including Viagra, pain drug Lyrica and the Prevnar pneumococcal vaccine, and Allergan that produces Botox and the Alzheimer’s drug Namenda, will make the biggest pharmaceutical company by sales, with about $60 billion in annual turnover.

The deal is bigger than Pfizer’s 2000 purchase of Warner- Lambert for $116 billion. Under the terms of the proposed transaction, the businesses of Pfizer and Allergan will be combined under Allergan, which will be renamed 'Pfizer'.

The companies expect that shares of the combined entity will be listed on the New York Stock Exchange. The combined company is expected to maintain Allergan’s Irish legal domicile and Pfizer will have its global operational headquarters in New York and its principal executive offices in Ireland.

Both companies have a good presence in India. Commenting on the development, Pfizer chairman and CEO Ian Read said, “The proposed combination of Pfizer and Allergan will create a leading global pharma company with the strength to research, discover and deliver more medicines and therapies to more people around the world.”

Through this combination, Pfizer will have greater financial flexibility that will facilitate “our continued discovery and development of new innovative medicines for patients, direct return of capital to shareholders, and continued investment in the United States, while also enabling our pursuit of business development opportunities on a more competitive footing within the industry,” he added.

“The combination of Allergan and Pfizer is a highly strategic, value-enhancing transaction that brings together the two bio-pharma powerhouses to change lives for the better,” Allergan chief executive officer Brent Saunders said.

Joining forces with Pfizer matches Allergan’s leading products in seven high growth therapeutic areas and robust R&D pipeline 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 added. Read will serve as the chairman and CEO of the combined company, while Allergan chief executive officer Brent Saunders will serve as its president and chief operating officer.

The merged company’s board is expected to have 15 directors, consisting of all of Pfizer’s 11 current directors and four current directors of Allergan. The directors from Allergan will be its current executive chairman Paul Bisaro, Saunders and two other directors from the company, to be selected at a later date.