The largest pharma deal ever has been given the green light by the companies' respective directors after the boards of Pfizer and Allergan met yesterday to discuss the $160bn (£106bn) merger.
The merger met with unanimous approval from the boards of Viagra-maker Pfizer, and Ireland-based Allergan, which manufactures Botox, and values Allergan at around $160bn, or $363.63 a share.
The combined company will be the largest drugs firm in the world with a market capitalisation of $300bn, ahead of rival Johnson & Johnson, which has a value of $277bn.
Allergan stockholders will receive 11.3 shares in the combined company for each Allergan share, and Pfizer's will receive one share in the new company for each old Pfizer share.
The deal is structured so Allergan acquires Pfizer and remains legally domiciled in Ireland where tax rates are far lower than the US, but after completion the combined company will be renamed Pfizer and listed on the New York stock exchange.
Pfizer stockholders will hold approximately 56 per cent of the combined company and Allergan shareholders will own approximately 44 per cent. The deal is expected to complete in the second half of 2016.
Pfizer announced it expected the merger to deliver more than $2bn-worth of savings in the first three years after completion, and the combined company will have a cash flow in excess of $25bn by 2018.
This includes the impact of Pfizer's new $5bn share-buyback programme, which it announced today, and expects to complete early next year.
Ian Read, Pfizer’s chairman and chief executive, will lead the combined company as joint chairman and CEO. Allergan's chief executive, Brent Saunders, will serve as president and chief operating officer, and oversee of all Pfizer and Allergan’s combined commercial businesses, manufacturing and strategy functions.
“The combination of Allergan and Pfizer is a highly strategic, value-enhancing transaction that brings together two biopharma powerhouses to change lives for the better,” said Saunders.
Pfizer boss 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," adding the deal would enable Pfizer to pursue "business development opportunities on a more competitive footing within our industry.”
The deal was reported to have been pushed through quickly as the US Treasury moves to clamp down on tax inversion, where a US company merges with one based overseas, and shifts its base abroad to reduce the tax bill on its profits.
Ireland's tax rates are 12.5 per cent, but Pfizer is currently headquartered in the US, where corporate tax rates are 35 per cent.