Pfizer, Allergan in final talks for all-stock deal worth a record-breaking $150B

Pfizer CEO Ian Read

Pfizer and Allergan are coming down to the wire on a merger that would be the biggest pharma deal ever. The all-stock transaction would be worth up to $150 billion, at a price of $370 to $380 per share, according to media reports, though analysts have estimated a per-share price of up to $400.

Bloomberg says an announcement could come as soon as Monday, though CNBC's sources peg the due date as the Monday after Thanksgiving. The two sides are "in the final stages" of negotiations, CNBC reports.

Buying Allergan ($AGN) would put Pfizer ($PFE) back on top of the Big Pharma rankings and could speed its path toward the big breakup CEO Ian Read has been preparing for since 2011. It would set up the combined company for big cost savings--including thousands of job cuts and consolidation in manufacturing and R&D, if Pfizer's deal history is a guide. And according to media reports, a "Pfizergan" combo would likely have Allergan helmsman Brent Saunders in the CEO chair.

The major impetus behind the potential deal, however, is Pfizer's desire for a tax inversion, which would move the company's domicile abroad and cut its tax rate considerably. Read has been scouting for an inversion deal for more than a year; his first big foray in that direction was last year's failed bid for U.K.-based AstraZeneca ($AZN).

Allergan CEO Brent Saunders

In fact, Bernstein analyst Tim Anderson contends that the tax benefits would be by far the biggest payoff from an Allergan buy.

"What would Pfizer be getting exactly from such an acquisition?" Anderson asked in a Thursday investor note. "Primarily a lower tax rate, one really good product (Botox), and a mish-mash of other drugs that are more 'second tier' in nature.

"While there may not be great strategic or therapeutic area synergies, we still believe such a transaction creates longer-term value under the assumption that the tax rate of the combined entity lowers from about 25% currently (for Pfizer) to somewhere potentially in the mid-teens."

But the two companies may have to act quickly to accomplish that goal; the U.S. Treasury Department issued a letter late Wednesday promising a new crackdown on such deals. The agency plans to release new guidance later this week, the letter said, "to deter and reduce further the economic benefits of corporate inversions."

Pfizer has a long history of megamergers; in fact, the acquisition that now holds the record as biggest pharma deal is Pfizer's Warner-Lambert buyout at $116 billion in 2000, Bloomberg says.

- get the latest from CNBC
- see the Bloomberg news
- here's the Treasury Department letter

Special Reports: The top 15 pharma companies by 2014 revenue - Pfizer | Pharma's top 10 M&A deals of 2014 - Actavis/Allergan - Actavis/Forest Laboratories | The 25 most influential people in biopharma in 2015 - Brent Saunders - Actavis

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