Pfizer and Al­ler­gan to merge in $160bn deal

Merger to cre­ate world’s big­gest phar­ma­ceu­ti­cal group

Kuwait Times - - FRONT PAGE -

NEW YORK: US-based Pfizer and Ire­land­based Al­ler­gan said yes­ter­day they will merge to cre­ate the world’s big­gest phar­ma­ceu­ti­cal group in a deal worth about $160 bil­lion. The trans­ac­tion is the big­gest merger an­nounced this year and has been ap­proved by the boards of both com­pa­nies. It should be fi­nal­ized in the sec­ond half of 2016 and will be fis­cally ad­van­ta­geous for Pfizer as it shifts its head­quar­ters to low-tax Ire­land. “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,” Pfizer’s chief ex­ec­u­tive Ian Read said in a state­ment.

His coun­ter­part at Al­ler­gan, Brent Saunders, called the merger a “highly strate­gic, val­ueen­hanc­ing trans­ac­tion”. Pro­vided the deal re­ceives ap­proval from share­hold­ers and reg­u­la­tors, the merged com­pany, to be re­named Pfizer plc, will be listed on the New York Stock Ex­change and trade un­der Pfizer’s cur­rent PFE ticker.

Pfizer plc will have its global op­er­a­tional head­quar­ters in New York and its prin­ci­pal ex­ec­u­tive of­fices in Ire­land. Ac­cord­ing to a source close to the deal, Pfizer wanted to beat im­ple­men­ta­tion of new US Trea­sury mea­sures which will make it more dif­fi­cult for US com­pa­nies to es­cape taxes via a merger which moves their tax home abroad, a mech­a­nism called a “tax in­ver­sion”.

The US com­pany has a large war chest of for­eign earn­ings which it does not want to repa­tri­ate to the United States, where it would then have to pay taxes on the sums. Ire­land is also known for its low cor­po­rate tax rates.

“Pfizer will have greater fi­nan­cial 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,” said Read.

The two com­pa­nies es­ti­mated their merger will de­liver more than $2 bil­lion in op­er­a­tional syn­er­gies over the first three years af­ter clos­ing. Pfizer share­hold­ers are ex­pected to hold 56 per­cent of the merged com­pany, with Al­ler­gan share­hold­ers the re­main­ing 44 per­cent.

Read will be­come the chief ex­ec­u­tive of the new Pfizer plc, while Saunders will be­come chief op­er­at­ing of­fi­cer with over­sight of all Pfizer and Al­ler­gan’s com­bined com­mer­cial busi­nesses, man­u­fac­tur­ing and strat­egy func­tions.

Pfizer said it did not plan to change its div­i­dend pol­icy of pay­ing out roughly half of an ad­justed mea­sure of earn­ings per share and would con­tinue with its planned $5 bil­lion share buy­back in the first half of 2016. In pre­mar­ket trade on Wall Street, shares in Pfizer dropped 2.5 per­cent to $31.36 and Al­ler­gan fell 1.5 per­cent to $307.76.

The merger is the big­gest an­nounced this year, beat­ing the $121-bil­lion com­bi­na­tion of top brew­ers An­heuser-Busch InBev and SAB Miller clinched ear­lier this month. It could end up be­ing the world’s sec­ond-largest merger fol­low­ing Bri­tish tele­com com­pany Voda­fone’s pur­chase of Ger­many’s Man­nes­mann for $172 bil­lion in­clud­ing debt, in 1999.

NEW YORK: A woman passes Pfizer’s world head­quar­ters yes­ter­day in New York. Pfizer and Al­ler­gan (inset) will join in a $160 bil­lion deal to cre­ate the world’s largest drug­maker. —AP

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