Pfizer and Allergan are close to striking a deal that would be the biggest of 2015 by far--and the biggest pharma deal ever, Bloomberg reports. The price: $370 to $380 per share, or almost $150 billion.
|Pfizer CEO Ian Read
An announcement could come as early as Monday, Bloomberg's sources say. Buying Allergan ($AGN) would put Pfizer ($PFE) back on top of the Big Pharma rankings and could speed its path toward the big breakup CEO Ian Read has been preparing for since mid-2013. It would set up the combined company for big cost savings--including thousands of job cuts and consolidation in manufacturing and R&D, if Pfizer's deal history is a guide. And according to media reports, a "Pfizergan" combo would likely have Allergan helmsman Brent Saunders in the CEO chair.
One major impetus behind the potential deal is Pfizer's desire for a tax inversion, which would move the company's domicile abroad and cut its tax rate considerably. But the two companies may have to act quickly to accomplish that goal; the U.S. Treasury Department issued a letter late Wednesday promising a new crackdown on such deals. The agency plans to release new guidance later this week, the letter said, "to deter and reduce further the economic benefits of corporate inversions."
"The fact that American companies, including Pfizer, continue to pursue inversions makes clear that additional steps are needed to stop this trend," Treasury Secretary Jacob Lew said in a statement, as quoted by Reuters.
Read has said he's confident that his company could properly structure an overseas buyout to achieve an inversion and reap the tax benefits, at least under the rules Treasury issued late last year. Whether another round of guidance would change that remains to be seen, but as Lew admitted in Wednesday's letter, only Congress can actually change the law to stop inversion deals.
Read is well aware of that fact; during Pfizer's third-quarter earnings call, he said he'd prefer to pull off an inversion before the current Congress wraps up its work. "[Y]ou'd rather do it in a Congress where you do know who are setting the rules and what the rules are," Read said at the time.
A tightening of the rules on inversions has already spoiled one pharma merger. Last year, AbbVie ($ABBV) pulled the plug on its $55 billion agreement to buy Ireland's Shire ($SHPG), citing changes that had "introduced an unacceptable level of uncertainty to the transaction."
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.
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