US drug giant Pfizer Inc (NYSE:PFE) has sealed a US$150bn (£99bn) deal with Botox producer Allergan (NYSE:AGN) to become the world’s largest drug company.
Allergan shareholders will receive 11.3 shares in the new company for each of their Allergan shares while Pfizer’s backers will receive shares on a one-for-one basis.
The deal values each Allergan share at US$363.63, a more than 30% premium to last night’s close.
The new company, to be called Pfizer plc, will have combined sales of US$60bn, some US$20bn more than the current leading drugs seller Merck (NYSE:MRK).
Like its failed bid for UK-listed AstraZeneca (LON:AZN) last year, the deal is believed to be designed to reduce its tax bill.
The Viagra maker is thought to have made its unsuccessful £69bn approach for Astra in the hope of side-stepping relatively high corporation tax in the US.
Crucially, with this deal, Pfizer will move its headquarters to Ireland, where Allergan is already based.
Irish corporation tax stands at an extremely low 12.5%, compared to the US’s 35%, and Pfizer said it expects the Allergan merger to save US$2bn in the first three years.
Pfizer boss Ian Read will become chief executive and chairman of the merged company, while Allergan boss Brent Saunders will take on roles as president and chief operating officer.
Read said: “The proposed combination of Pfizer and Allergan will create a leading global pharmaceutical company with the strength to research, discover and deliver more medicines and more therapies to more people around the world.”
The takeover will be the biggest pharma deal in history, and the largest of the year surpassing AB InBev’s planned US$107bn takeover of rival brewer SABMiller.
Jefferies backed the deal, saying: “Whilst the acquisition of Allergan is clearly a high risk and expensive transaction, it gives important strategic long-term benefits and flexibility.”