In what is the largest health care merger in industry history, New York City-based pharmaceutical company Pfizer Inc. announced Monday that it had entered into an agreement to buy Irish rival Allergan PLCÂ for $160 billion.
By relocating its headquarters to Ireland while keeping its global operational headquarters in New York, the deal was largely speculated to be a tax-cutting move by Pfizer.
Allergan shareholders will receive 11.3 shares of the combined company for each share. Pfizer stockholders will receive one share of the combined company for each share.
“Through this combination, Pfizer will have greater 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 our industry,” Pfizer Chairman and CEO Ian Read said in a statement released Monday.
Under the terms of the deal, which is expected to close in the second half of 2016, the companies will be combined under Allergan PLC, which will be renamed Pfizer PLC. The merged company, the largest drugmaker in the world, is expected to generate more than $25 billion in annual operating cash flow starting in 2018.
The move drew sharp criticism from several 2016 presidential hopefuls, including Donald Trump, Hillary Clinton and Bernie Sanders. Pfizer said in its statement the move will create “increased financial flexibility,” adding it “facilitates continued investment in the United States.”
Philip G. Cohen, a legal studies and taxation professor at Pace University’s Lubin School of Business, said such moves should be prevented going forward.
“It is clear that Congress should enact legislation targeting inversions in order to protect the corporate tax base from further diminution from these transactions,” Cohen said. “This should not be delayed by the excuse that this must wait until fundamental tax reform is addressed.”
Allergan CEO Brent Saunders called the deal a “highly strategic, value-enhancing transaction.”
“This bold action is the next chapter in the successful transformation of Allergan allowing us to operate with greater resources at a much bigger scale,” he said.
Guggenheim Securities; Goldman, Sachs & Co.; Centerview Partners; and Moelis & Company are serving as Pfizer’s financial advisers. J.P. Morgan and Morgan Stanley are representing Allergan in the deal.
Allergan, based in Dublin, is perhaps known best for its Botox, the injectable skin product. Pfizer’s brands include Lipitor, Zoloft, Advil, Viagra and Xanax as well as other medicines and vaccines. Pfizer said this month it would sell 200 acres and more than 2 million square feet of its Pearl River campus on Middletown Road to Industrial Realty Group, LLC, a Los Angeles-based real estate development company.
In a release, Industrial Realty Group officials said they plan to build a “Work, Study, Play” mixed-use development on the property. Pfizer will still operate 500,000 square feet of space on the property and will lease back roughly 1.2 million square feet of space from Industrial Realty Group.
“This site has extensive potential,” said John Mase, CEO of Industrial Realty Group.
