Pfizer Inc. and Allergan plc announced last 23rd November that their boards of directors had unanimously approved, and the companies had entered into a definitive merger agreement that will result in a new global biopharmaceutical leader with best-in-class innovative and established businesses.
Pfizer anticipated that the combined company will have a pro forma Adjusted Effective Tax Rate of approximately 17%-18% by the first full year after the closing of the transaction and assured that the merger will not reduce the fiscal dues to be paid in the USA, but the fact is that this may happen if one read carefully the terms and heaquartering plans of both chemical companies.
First, Pfizer’s U.S. stockholders will recognize a taxable gain, but not a loss, for U.S. federal income tax purposes. The transaction is expected to be tax-free for U.S. federal income tax purposes to Allergan shareholders.
Second, Upon the closing of the transaction, the combined company is expected to maintain Allergan’s Irish legal address. Pfizer plc will have its global operational headquarters in New York and its main executive offices in Ireland.
Pfizer anticipates the transaction will deliver more than $2 Bn in operational synergies over the first three years after closing. The transaction, once completed is expected to generate a combined operating cash flow in excess of $25 Bn beginning in 2018.
Once closed the operation, and assuming that all $12 Bn of cash is paid in the merger, it is expected that former Pfizer stockholders will hold approximately 56% of the combined company and Allergan shareholders will own approximately 44% of the combined company on a fully diluted basis.
As a result of the combination with Allergan and subsequent integration of the two companies, Pfizer now expects to make a decision about a potential separation of the combined company’s innovative and established businesses by no later than the end of 2018.
A winning merger, able to bring a lot of benefits both operational and financial to Pfizer and Allergan shareholders, but again a tax reducing operation bringing another company to Ireland by probably no other reason but tax savings.
NISE traded titles but Irish headquarters
Under the terms of the proposed transaction, the businesses of Pfizer and Allergan will be combined under Allergan plc, which will be renamed “Pfizer plc.” The companies expect that shares of the combined company will be listed on the New York Stock Exchange and trade under the “PFE” ticker.
Pfizer’s Ian Read, to become Chairman and CEO of the combined business
Pfizer plc’s board is expected to have 15 directors, consisting of all of Pfizer’s 11 current directors and 4 current directors of Allergan. The directors from Allergan will be Paul Bisaro, Allergan’s current Executive Chairman, Brent Saunders, Allergan’s current Chief Executive Officer (CEO), and two other directors from Allergan to be selected at a later date. Ian Read, Pfizer’s Chairman and CEO, will serve as Chairman and CEO of the combined company. Brent Saunders will serve as President and Chief Operating Officer of the combined company. He will be responsible for the oversight of all Pfizer and Allergan’s combined commercial businesses, manufacturing and strategy functions.
Many operational and commercial benefits expected from this merger
Pfizer’s innovative businesses will be significantly enhanced by the addition of a growing revenue stream from Allergan’s durable and innovative flagship brands in desirable therapeutic areas such as Aesthetics and Dermatology, Eye Care, Gastrointestinal, Neuroscience and Urology. The combined company will benefit from a broader innovative portfolio of leading medicines in key categories and a platform for sustainable growth with diversified payer groups. With the addition of Allergan, Pfizer will enhance its R&D capabilities in both new molecular entities and product line extensions. A combined pipeline of more than 100 mid-to-late stage programs in development and greater resources to invest in R&D and manufacturing is expected to sustain the growth of the innovative business over the long term. Through product approvals, launches and inline performance the combined company aspires to be a leader in growth.
The combination of Pfizer and Allergan will significantly increase the scale of Pfizer’s established business, and their complementary capabilities will maximize the combined established portfolio. The addition of Allergan’s Women’s Health and Anti-Infectives portfolio will add depth to Pfizer’s established business, and Pfizer will expand the reach of Allergan’s established portfolio using its existing commercial capabilities, infrastructure and global scale. In addition, Allergan brings topical formulation, manufacturing and its Anda distribution capabilities to the combined company.
Merger agreement, still pending
The tansaction is still pending. The completion of the transaction, which is expected in the second half of 2016, is subject to certain conditions, including receipt of regulatory approval in certain jurisdictions, including the United States and European Union, the receipt of necessary approvals from both Pfizer and Allergan shareholders, and the completion of Allergan’s pending divestiture of its generics business to Teva Pharmaceuticals Ltd., which Allergan expects will close in the first quarter of 2016.
