Pfizer and Allergan Agree to $160 Billion Merger

Pfizer and Allergan announce $160 billion merger, which is the second-largest in the health care industry's history and the largest to use a controversial tax-saving strategy.

Health care consolidation continues to pick up speed as Pfizer and Allergan announce their boards of directors have reached an agreement for a merger. The transaction, worth $160 billion, is expected to close in the second half of 2016.

The merger deal is the second-largest in history in the health care industry, and, as USA Today pointed out, the biggest using a controversial tax-saving strategy. The companies will combine under Allergan plc and retain Allergan’s legal and tax domicile in Ireland, but will be renamed Pfizer plc. The new company will have its global operational headquarters in New York and its principal executive offices in 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,” Ian Read, chairman and chief executive officer of Pfizer, said in a statement.

Pfizer plc’s board will include all of Pfizer’s 11 directors and 4 of Allergan’s with Read continuing to serve as chairman and CEO of the combined company. According to The Wall Street Journal, Read has spoken out in the past against the high corporate tax rates in the US.

“Through this combination, 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,” Read said.

The merger between Pfizer and Allergan, which still has to be approved by US regulators, is the latest in a long line of big deals made in 2015, following the Walgreens-Rite Aid, Anthem-Cigna, and Aetna-Humana deals. Pfizer’s big drugs are Viagra and Lipitor, and Allergan’s brands include Botox, and the new pipeline will have more than 100 mid-to-late stage programs in development. Pfizer estimates that the new combined operating cash flow will top $25 billion in 2018.

“This bold action is the next chapter in the successful transformation of Allergan allowing us to operate with greater resources at a much bigger scale,” Allergan CEO Brent Saunders said. “Joining forces with Pfizer matches our leading products in seven high growth therapeutic areas and our robust R&D pipeline with Pfizer’s leading innovative and established businesses, vast global footprint and strength in discovery and development research to create a new biopharma leader.”