IRELAND: Allergan is in preliminary discussions about selling itself to Pfizer, a deal that would create the world’s largest drugmaker with a market capitalisation in excess of $300bn.
The company, best known as the maker of the wrinkle smoother Botox, said that it had been “approached by Pfizer and is in preliminary friendly discussions regarding a potential business combination”.
No agreement had been reached and there was no certainty that the talks would lead to a deal, Allergan said in the statement, which it had to release because of takeover rules in Ireland, where it is domiciled.
Shares in Allergan were up more than 8 per cent in early trading in New York, giving the company a market capitalisation of $113bn. Shares in Pfizer, which has a market capitalisation of nearly $219bn, were down 0.3 per cent.
The negotiations come after an avalanche of mergers and acquisitions in the healthcare industry, where $850bn of deals have been announced since the start of the year. Acquiring Allergan would allow Pfizer to complete a coveted “tax inversion” by moving its domicile from the US to Ireland. The move would slash the amount of American corporation tax it pays. Allergan paid an effective tax rate of 4.8 per cent last year, versus 25.5 per cent for Pfizer.
The deal would also catapult a combined Pfizer-Allergan past the world’s largest healthcare company, Johnson & Johnson, which has a market capitalisation of $277bn.
Some investors and healthcare bankers expect the flow of healthcare deals to slow when the US Federal Reserve makes it more expensive to borrow by raising interest rates, while a recent rout in healthcare stocks has made some executives more cautious about attempting large deals.
However, Pfizer, Allergan, J&J and Gilead, a Californian biotech group, are still in search of acquisition targets, according to the companies’ advisers and investors.
Ian Read, Pfizer chief executive, recently contacted his counterpart at Allergan, Brent Saunders, to initiate discussions, according to two people familiar with the situation.
Allergan recently agreed to sell its generics business to Teva for $41bn and yesterday said it was “strongly committed” to the deal, which it expects to close in the first quarter of 2016.- Saria