Pfizer-Allergan Reportedly Nearing $150 Billion Merger

Medtronic became the biggest company in Ireland through its $50-billion acquisition of Covidien. Pfizer's pending buy of Allergan will reportedly cost it three times as much. Pfizer, however, is also dropping hints that it plans on breaking up its business in 2016.

Qmed News

New U.S. Treasury restrictions designed to curb so-called inversion deals seem to be not having their intended effect. Pfizer, the biggest pharmaceutical company in the world, which earlier this year bought drug and infusion-pump maker Hospira, is working on a deal with Allergan that would give it an Irish domicile as well as a lower tax rate. It would be the biggest pharmaceutical deal. The two companies are said to have found a loophole that would avoid many of the potential U.S. Treasury hurdles: make Allergan the technical acquisitor in the deal.

Reuters reports that the two companies have agreed to roles their respective CEOs would assume in a merged organization, with Pfizer CEO Ian Read reportedly planning on being the  CEO of the merged organization and Allergan CEO Brent Saunders taking on a "very senior role."

The fact that Allergan is based in Ireland is a recent phenomenon that occurred after the firm purchased Actavis Plc, which then took over the name "Allergan."

Pfizer is contemplating breaking up its business into two business units--a decision it has said it will make by the fourth quarter of 2016. One business unit would specialize in new products while the other would focus on older, soon-to-be generic products.

One potential hurdle is that the U.S. Treasure on November 19 announced new restrictions on inversion deals. While the Treasury Department can't technically block inversions, its new restrictions specifically seek to curtail the ability of U.S. companies to merge with foreign firms. The restrictions would also curtail an inverted U.S. company from transferring its assets to a foreign country without paying taxes to the U.S. government. The new restrictions would cover all inversions completed on or after September 22, 2014, including Medtronic's aforementioned buy of Covidien.

Allergan's market value is approximately worth $122 billion, while Pfizer's is about $206 billion.