Allergan will wed Pfizer in the largest corporate wedding involving pharmaceutical companies after the boards of the two companies approved the deal on Sunday. The reverse merger is worth more than $150 billion.
However, Reuters reports that the merged firm plan to split into two companies in 2017. One would focus on selling high-margin branded drugs and the other on affordable generic. Ian Read, chief executive of Pfizer who would lead the merged company, said Pfizer could decide on the split by late 2016 after financial analysis of the two pharmas.
The takeover would enable New York-based Pfizer to move overseas and benefit from lower corporate tax rates, reports The Wall Street Journal. Allergan is the smaller of the two companies and based in Dublin.
Pfizer, which has a 25 percent tax rate, tried in 2014 to buy AstraZeneca, but the Britain-based drug giant rejected the offer. With the Allergan merger, Pfizer's tax rate is expected to go down to 20 percent. Allergan's tax rate of 15 percent tax rate is also the result of an inversion deal after Actavis bought Allergan and kept the latter as the corporate name for the merged company.
Allergan CEO Brent Saunders will become president and chief operating officer of the merged firm. The deal would have Pfizer pay 11.3 of its shares for every Allergan share. There is also a small cash component, but it accounts for less than 10 percent of the deal.
Pfizer manufactures pneumonia drug Prevnar, erectile dysfunction drug Viagra and nerve pain medication Lyrica. Allergan produces Botox, an anti-wrinkle treatment. With their corporate wedding, patients would have a wider range of medicines and vaccines available to cover more diseases such as Alzheimer's, cancer, eye ailments and rheumatoid arthritis.
In 2014, Pfizer had $50 billion revenue in 2014, while Allergan sold $13 billion drugs for the same year.