Viagra, Botox makers to merge
$160 B deal to create world’s largest drugmaker
NEW YORK (Reuters) – Pfizer Inc. on Monday said it would buy Botox maker Allergan Plc in a deal worth $160 billion to slash its US tax bill, rekindling a fierce political debate over the financial maneuver.
The acquisition, which would create the world’s largest drugmaker and shift Pfizer’s headquarters to Ireland, would also be the biggestever instance of a US company reincorporating overseas to lower its taxes. US President Barack Obama has called such inversion deals unpatriotic and has tried to crack down on the practice.
Democratic presidential frontrunner Hillary Clinton pledged to propose measures to prevent such deals. The merger was also slammed by her rival Senator Bernie Sanders as well as by Republican presidential candidate Donald Trump.
“The fact that Pfizer is leaving our country with a tremendous loss of jobs is disgusting,” Trump said in a statement.
It was not immediately known how many jobs would be lost as a result of the merger.
Shares of Allergan fell 3.4 percent and Pfizer closed down 2.6 percent as investors learned the merger, under discussion since late October, would bring lower cost savings than they had hoped.
Pfizer also disappointed some investors by delaying by two years a decision on whether to sell off its division consisting of products facing generic competition.
To avoid potential restrictions, the transaction was structured as smaller, Dublin-based Allergan buying Pfizer, although the combined company will be known as Pfizer Plc and continue to be led by chief executive officer Ian Read.
The US Treasury, concerned about losing billions in tax revenue, has been taking steps to limit the benefits of tax inversion deals, but it admitted last week that it would take legislation from Congress to stop such moves.
The deal enhances offerings from both Pfizer’s faster-growing branded products business, with additions like Botox, and its older established products unit. Still, investors had hoped Pfizer would sell off the lower-margin business in 2017, a move now put off by the time required to integrate Allergan.
“The only thing I’d really say I’m disappointed about is Pfizer’s postponing their break up,” said Gabelli Funds portfolio manager Jeff Jonas. He called the delay decision “pretty conservative and a little late.”
Others were disappointed by other aspects of the deal, including the projected cost savings, and a lack of details on potentially increased share buybacks.
“Synergies of $2 billion plus in the third year are less than the $4 billion we had estimated in year 1,” said Cowen and Co analyst Steve Scala.
On a conference call with analysts, Pfizer said the merger would give it enhanced access to its tens of billions of dollars parked overseas and allow for more share buybacks, dividend payments and business development. The combined company would have annual sales of about $64 billion.