New York-based Pfizer Inc. is expected to announce that it has closed a merger deal with Ireland-based Allergan Plc worth more than $150 billion. If the reports will be confirmed, the deal will place Pfizer on top of the pharmaceutical industry as the largest drug maker in the world.
The deal is said to entail a small cash component, which is only about 10 percent of the entire deal. Aside from that, Pfizer will reportedly pay 11.3 percent of its shares for every Allergan share.
Significant Changes
The combined company will be headed by the current chief executive of Pfizer, 62-year-old Ian Read. Meanwhile, Allergan's present CEO, Brent Saunders will hold a high senior position in the operations and integration department. Saunders, 45, will also occupy a seat in the merged firm's board.
The merger deal will pave the way for a new pharmaceutical giant as the combined companies are estimated to have an annual sales of $60 billion, thereby putting Merck & Co in the number two spot, with only $40 billion worth of annual sales.
Inversion Strategy
Avoiding skyrocket U.S. tax prices is said to be one of the reasons why the deal was made. In a controversial strategy called inversion, companies change their U.S. addresses to foreign ones so as to avoid being caught up in the 35 percent business tax rate imposed by the U.S. — the highest in the world.
The U.S. Treasury Department has been making actions to eradicate such business moves, even declaring a new set of guidance about how it will value U.S. firms that take part in the said strategy.
"These actions further reduce the benefits of an inversion and make these transactions even more difficult to achieve," said Jacob Lew, the secretary of the Treasury Department.
Merge to Split
While Pfizer may be enhancing the rapidly moving brands of Allergan, it may soon take a different course of action in the future.
Analysts in the pharmaceutical business sector comments that the merger deal may be a part of Pfizer's subsequent move to split the huge company into two by 2017. The first company may focus on the high-end branded medicines, while the second may be in charge of selling affordable generics that have caused Pfizer's unfavorable statistics in the recent years.
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