pfizerREUTERS/Lucas JacksonWorkers raising a US flag outside the Pfizer building in New York.

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Disclaimer
The pharmaceutical giants Pfizer and Allergan will combine to form a $160 billion global drug behemoth.
Allergan shareholders will be receiving $363.63 worth of Pfizer stock as payment. Specifically, for each share of Allergan, investors will receive 11.3 shares (based on the Pfizer's Friday closing price of $32.18) of the new combined company.
Importantly, the combined businesses will be renamed Pfizer Plc but legally will be combined under Allergan Plc. This means the combined company will officially be domiciled in Ireland.
"Upon the closing of the transaction, the combined company is expected to maintain Allergan's Irish legal domicile," management said.
This type of deal, also known as a tax inversion, has been embraced by more and more US companies as a way to dodge relatively high US tax rates by moving to low-tax regions like Ireland.
For Pfizer, this means billions of dollars in savings.
"Pfizer anticipates the transaction will deliver more than $2 billion in operational synergies over the first three years after closing," management said. "Pfizer anticipates 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."
"The proposed combination of Pfizer and Allergan will create a leading global pharmaceutical company with the strength to research, discover, and deliver more medicines and therapies to more people around the world," Pfizer CEO Ian Read said. "Allergan's businesses align with and enhance Pfizer's businesses, creating best-in-class, sustainable, innovative, and established businesses that are poised for growth."
The combined company will continue to trade on the New York Stock Exchange under the ticker PFE.
Here are the bullets summarizing the deal via Pfizer:
  • Creates a new global biopharmaceutical leader with best-in-class innovative and established businesses
  • Enhances revenue and earnings growth profile of innovative and established businesses
  • Broadens innovative pipeline with more than 100 combined mid-to-late stage programs in development
  • Transaction expected to close in the second half of 2016
  • Expected to be neutral to Pfizer's Adjusted Diluted EPS1 in 2017, accretive beginning in calendar year 2018 and more than 10% accretive in 2019 with high-teens percentage accretion in 20202
  • Expect combined Operating Cash Flow in excess of $25 Billion beginning in 2018
  • Increased financial flexibility facilitates continued investment in the United States
  • Preserves opportunity for a potential future separation of innovative and established businesses

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