Pfizer seals US$160bn deal to buy Allergan

Pfizer will gain Allergan's flagship brands, including Botox, in therapeutic areas such as aesthetics and dermatology, eye care, gastrointestinal, neuroscience and urology

US drugmaker Pfizer has sealed a deal to buy Ireland-based Allergan for US$160bn in the largest pharmaceuticals deal in history.

The transaction, first mooted at the end of October, will create 'a leading global pharmaceutical company with the strength to research, discover and deliver more medicines and therapies to more people around the world', according to Ian Read, Chairman and Chief Executive of Pfizer.

'Allergan’s businesses align with and enhance Pfizer’s businesses, creating best-in-class, sustainable, innovative and established businesses that are poised for growth,' he said. '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 US, while also enabling our pursuit of business development opportunities on a more competitive footing within our industry.'

Pfizer said the new company would retain the US firm's name and its New York operational headquarters, but would have its 'principal executive offices' in Dublin.

This will allow the combined company to reduce its tax bill on earnings derived from outside the US.

Allergan’s businesses align with and enhance Pfizer’s businesses

Pfizer will pay $363.63 for each Allergan share and Allergan shareholders will receive 11.3 shares in the new company for each of their Allergan shares.

Pfizer shareholders will receive one share for each of their Pfizer shares.

Last year, Pfizer made an offer to buy UK drugs group AstraZeneca, which rejected the offer, stating that it undervalued the company.

Brent Saunders, Chief Executive of Allergan, said: 'The combination of Allergan and Pfizer is a highly strategic, value-enhancing transaction that brings together two biopharma powerhouses to change lives for the better.'

Read will be Chairman and CEO of the combined company, with Saunders as President and Chief Operating Officer.

Pfizer’s businesses will be significantly enhanced by the addition of Allergan’s flagship brands, including Botox, in therapeutic areas such as aesthetics and dermatology, eye care, gastrointestinal, neuroscience and urology.

The combination of Allergan and Pfizer is a highly strategic, value-enhancing transaction

With the addition of Allergan, Pfizer will enhance its R&D capabilities in both new molecular entities and product line extensions. There will be a combined pipeline of more than 100 mid-to-late stage programmes and greater resources to invest in R&D.

Pfizer anticipates that the transaction will deliver more than $2bn in operational synergies over the first three years after closing.

The deal is expected to close in the second half of 2016, subject to regulatory approval in the US and EU, shareholder approval, and the completion of Allergan’s pending sale of its generics business to Teva Pharmaceuticals, which Allergan expects will close in the first quarter of 2016.

John Colley, Professor of Practice at Warwick Business School and an expert on large-scale mergers, commented: 'This deal follows a pattern in which the pharmaceutical industry has seen acquisitions totalling more than $600bn this year as the industry consolidates.

'Industry valuations increase as industry players become concerned at being left behind in the race for scale. In the instance of Pfizer, it is also pursuing greater growth as its own established products are losing patent protection at a greater rate than it can produce innovative products.

'Allergan's drug portfolio has greater potential for growth. In addition, the lure of tax advantages from a Dublin Head Office has been a significant factor in driving this deal. The threat of succumbing to US tax rates has meant that Pfizer has been desperate for a deal outside the US. The failure of the AstraZeneca bid in a consolidating industry has driven the substantial price paid for Allergan.'

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