Update: 7:05 a.m. EST -- Pfizer Inc. and Allergan PLC have confirmed a merger, which is valued at about $160 billion, Monday, the companies announced in a statement.
The deal, which is the largest ever in the healthcare sector, values Allergan at $363.63 a share. Allergan shareholders will receive 11.3 shares of the combined company for each of their Allergan shares, and Pfizer stockholders will receive one share for each that they hold.
The merger, which will create the world's largest drugmaker, will be closed in the second half of 2016 subject to regulatory approval. Pfizer would shift its executive offices to Ireland, where Allergan is registered, in a move aimed at slashing its corporate tax rate.
Shares of both Pfizer and Allergan were down in pre-market trading after the deal's announcement. While Pfizer's stock was down by about 2.73 percent on the NYSE, Allergan's stock was down by about 2.07 percent on Nasdaq.
Pfizer Inc. and Allergan PLC are set to merge in a deal worth more than $150 billion, the Wall Street Journal reported Sunday. The merger would create the world’s largest drugmaker in the largest-ever inversion deal. Inversions allow companies to lower their U.S. tax bills by acquiring a foreign legal address. The companies’ boards are expected to approve the agreement Sunday, and may announce it on Monday.
People familiar with the matter told the Wall Street Journal that the deal’s final terms include 11.3 Pfizer shares for every Allergan share, along with a small cash component. They said the deal will be structured as a reverse merger, with Dublin-based Allergan buying the New York-based Pfizer. Pfizer CEO Ian Read is expected to lead the combined company with Allergan CEO Brent Saunders acting as second in command.
Experts had previously projected the company’s taxes could easily drop to half of what they are today if the companies merged into an Irish-organized drugmaker. Ireland’s tax rate charges companies 12.5 percent of profits, while the United States maintains the highest corporate tax rate of any country.
In October, Read said the company was suffering as a result of its competitors increasingly completing so-called tax inversion deals. The deal is expected to help Pfizer boost its revenues, which were reported at $12.1 billion for the third quarter of 2015.
“I feel we are at a tremendous disadvantage right now in that race,” Read said at a Wall Street Journal event.
Allergan had confirmed in October that the two companies were in “preliminary friendly discussions” regarding a merger. The news came just three months after Allergan announced a $40 billion deal to sell off its generics unit to Teva Pharmaceuticals.
The news comes in a year rife with lucrative pharmaceutical industry deals. Pharmaceutical companies struck $211.7 billion worth of deals in the first half of 2015 -- up from $205 billion in the first half of 2014, which was already a record year in terms of the agreements’ volume and value.