Pfizer and Allergen

By Ben Shrewsbury

Pharmaceutical giant Pfizer which manufactures Viagra is set to

acquire the Botox producing company Allergan to create a super-
conglomerate which will dominate the pharmaceutical market.
The $160bn deal is the third biggest M&A of all time and will create a company with
revenues of around $65bn, overtaking Johnson & Johnson as the
market leader. This price is a premium of 30% compared to
Allergans undisturbed share price. Goldman Sachs is the main
advisor to Pfizer while Allergen is working alongside both JP
Morgan and Morgan Stanley.

Other than the usual synergies that come out of M&A deals there is another benefit that
is driving this agreement; it will allow Pfizer to take up Allergans Ireland-based
headquarters as its own. In doing so Pfizers corporate tax rate will be able to fall
significantly from approximately 25% in the US to around 17% in Ireland, saving billions
of dollars in tax expenses every year. The proposed plan however hasnt been met with
investor confidence, as seen in both Pfizer and Allergan share prices which fell by 2.7%
and 3.6% respectively following announcements of the deal. This is because inversion
deals of this nature always come with controversies. Investors are nervous at the
likelihood of the deal coming to fruition as the deal requires US regulators approval to
go ahead which wont be easy to get. There has been a lot of opposition to the deal in the
US; Democratic presidential nomination front-runner Hillary Clinton has said she
would ensure there were specific steps to prevent these kind of transactions. This is
because the US will not only lose billions of dollars of tax revenue every year but it could
potentially lead to an even higher price of prescription drugs for US citizens - something
that is already a debated problem. If US regulators do not allow the deal to take place it
will have to be restructured as a reserve merger. In this instance Allergan will technically
be buying Pfizer so US approval will not be needed.