Deal Reached: Pfizer Buying Allergan for $160 Billion
- Updated: November 23, 2015
On Monday, Pfizer Inc announced that it would acquire Allergan Plc the maker of Botox for what is expected to be $160 billion. The acquisition will help Pfizer to slash its tax bill in the U.S., but will certainly spark outrage on Capitol Hill and the White House over the maneuver to lower its corporate tax bill.
The acquisition would move the headquarters of Pfizer to Ireland making it the biggest tax inversion ever. This news prompted Hillary Clinton the presidential front runner from the Democrats to promise to make a proposal to prevent this controversial and increasingly more popular practice that aims at helping companies based in the U.S. lower taxes by having a domicile overseas where tax rates are lower.
Allergan as well as Pfizer shares were down more than 2% on the news. The merger would create the largest drug maker in the world but bring lower cost savings than both had hoped for.
It would also delay the decision by Pfizer of selling off the division of products that are facing competition from generics.
U.S. President Obama has said that the tax inversions are unpatriotic and had attempted to crack down on them through the Treasury Department.
Vermont Senator Bernie Sanders, who is another candidate for the presidency for the Democrats, called on the White House to stop this deal.
To avoid the possible restrictions, this deal has Allergan, the far smaller of the two entities is purchasing Pfizer, although the new combined company will be called Pfizer Plc and will have Ian Read as CEO, who is the current Pfizer CEO.
However, the company would then have its tax domicile in Ireland where taxes will be as low as between 17% and 19%, while in the U.S. they would be 25% or higher.
The acquisition of Allergan will delay the decision by New York’s Pfizer on whether it will sell off its unit that is lower margin by up to two years, said the company on Monday.
This deal will enhance the offerings of both Pfizer’s branded products that are faster growing with additions such as Botox and its older more established products unit.
Synergies were expected at the beginning of the negotiations to be about $4 billion in the third year after the acquisition, but now will likely be just $2 billion.
It was unknown as to the number of jobs that might be lost due to the merger, which should close during the second six months of next year.
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