Allergan PLC and
Pfizer Inc.
are considering structuring a merger of the drug companies so that it is an acquisition of Pfizer by Allergan, according to people familiar with the matter.
However the deal is technically structured, the much larger Pfizer will effectively be buying Allergan and assuming a lower offshore tax jurisdiction. Allergan shareholders would receive a premium and end up with 40% to 45% of the combined company, some of the people said. The deal is expected to be mainly in stock, but it could contain a small cash component, they said.
While the timing could get sped up, the two sides are likely to strike a deal in seven to 10 days—assuming the talks don’t fall apart, the people said.
It is unclear why Allergan would be the acquiring entity, but the move could make it easier for the companies to sidestep a government crackdown on so-called inversion deals, in which a U.S. company buys a smaller foreign rival and moves its tax headquarters abroad. The U.S. Treasury has indicated that it could soon tighten rules aimed at discouraging such deals.
The tie-up is expected to value each Allergan share at just over 11 Pfizer shares. While that means the price will move around, as of Thursday’s close it values Allergan at about $355 a share.
Pfizer shares fell 3.1% to $32.29, hurt by fears of the impending Treasury crackdown. Allergan stock fell 2.8% to $302.05. Before The Wall Street Journal
first reported on the merger talks late last month, Allergan stock traded at $287.04.
Allergan’s market value currently stands at $122 billion, while Pfizer’s is $206 billion.