Pfizer and Allergan set to announce $150 billion merger

Pfizer is on the brink of confirming a merger with Allergan worth $150 billion, creating the world’s biggest pharma company.

The mega-merger would be the biggest ever pharma acquisition, topping of a year of frenzied deal-making across the sector.

The US pharma giant is understood to have secured formal board approval to acquire the Ireland-domiciled firm, allowing it to perform a tax inversion deal – just before the Obama administration closes the door on such deals.

Reuters has reported that the deal will be confirmed later today, citing sources close to the companies. The tax inversion deal will allow Pfizer to avoid paying US taxes on billions of foreign-owned revenues, plus pay a much lower corporate tax rate.

Pfizer’s chief executive Ian Read has been searching for such a deal for some time, having been rebuffed by UK-based AstraZeneca in May 2014.

The move is certain to be heavily criticised by Democrat and Republican presidential candidates, but Pfizer is determined to push through the deal before any new rule changes are enforced.

There have also been rumours that Allergan’s chief executive Brent Saunders will take the helm at the new enlarged Pfizer, with Ian Read stepping aside. This would also be highly controversial, as Mr Saunders is known for focusing on deal-making and cost-cutting, and for scepticism about in-house drug discovery.

However it now looks like the 62-year-old Ian Read will be named as CEO, with Brent Saunders, 45, taking a very senior role.

The deal would involve Pfizer paying with 11.3 of its shares for each Allergan share, Reuters was told. It will also involve a small cash component, accounting for less than 10 per cent of the value of the deal.

The merger looks unlikely to be Pfizer’s last strategic move. The firm has made it clear that it has been considering a further break-up of its multi-division business. Pfizer acquired injectables and biosimilar firm Hospira for $17 billion in February, adding to its Global Established Pharmaceutical (GEP) division. However this unit could be spun off over the next few years as Pfizer aggressively pursues maximum shareholder value from its portfolio.

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