November 23, 2015
By Mark Terry, BioSpace.com Breaking News Staff
After three weeks of speculation New York-based Pfizer Inc. announced today that it was merging with Dublin, Ireland-based Allergan plc . Board members for both companies unanimously voted Sunday to approve the deal, which will have a total enterprise value of about $160 billion.
The deal will be a stock transaction of about $363.63 per Allergan share, greater than a 30 percent premium based on Pfizer and Allergan’s unaffected stock share prices as of Oct. 28, 2015.
“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 therapies to more people around the world,” said Ian Read, Pfizer’s chairman and chief executive officer in a statement. “Allergan’s businesses align with and enhance Pfizer’s businesses, creating best-in-class, sustainable, innovative and established businesses that are poised for growth.”
The two companies will combine under Allergan plc, and be domiciled in Ireland for the country’s lower tax rate. The new company will be named Pfizer plc and is expected to be listed on the New York Stock Exchange under the “PFE” ticker. Global operational headquarters will be in New York and principal executive offices in Ireland.
In a move that is slightly surprising, Allergan’s chief executive officer Brent Saunders, will not be the chief executive officer of the newly merged company, as expected. Last week unidentified inside sources indicated that the deal was dependent on Saunders becoming chief executive officer.
However, Saunders will have a seat on the board and will serve as president and chief operating officer of the combined company. Ian Read will be chairman and chief executive officer. Allergan’s Paul Bisaro, its current chairman, will also join the board as well as two other Allergan directors to be named later.
There has also been speculation that if the two companies merged, it was only a matter of time before they split into two, one focused on research and development and innovative drugs and the other focused on mature, branded and generic drugs. Pfizer indicated in their announcement today that it plans to make a decision on a potential split no later than the end of 2018.
In a year filled with merger and acquisition activity in the biopharma sector, the Pfizer-Allergan deal tops them all. It will bring the 2015 totals to more than $600 billion. This deal is the largest in the history of the healthcare sector, according to Reuters, with the previous top spot also occupied by Pfizer when it bought Warner-Lambert for $90 billion in 1999.
Apparently the deal has been structured in such a way that Allergan is acquiring Pfizer, probably to avoid current U.S. Treasury Department guidelines regarding tax inversion deals. It seems clear, however, that Pfizer is running the newly merged companies.
These sort of mega-mergers with tax inversion deals can also be unpopular politically. “Drug prices are out of control, and allowing a merger like this is like giving Jesse James a much bigger gun,” David Balto, an antitrust attorney and former policy director at the Federal Trade Commission (FTC) told The LA Times. “There is no evidence whatsoever that these mergers lead to some kind of benefit for consumers and lower prices.” He also expects the FTC will investigate the deal.
Another group unlikely to be thrilled with the deal are people who will inevitably be laid off as a result. Typically, job cuts are made because of duplicated services and functions. An unidentified employee at Allergan’s Irvine facility told The LA Times, “For us, it’s just other news like the news we’ve had for the past two years,” he said, referring to the numerous acquisitions Allergan has been involved in. But the employee also pointed out that, “When you have an acquisition, people have to go.”
