Tax Row Over Pfizer's Merger With Botox Firm

Viagra maker Pfizer (NYSE: PFE - news) and Allergan (Berlin: 28551749.BE - news) - the firm behind Botox - are set to join forces in what will be the biggest healthcare deal in history.

The tie-up - the third biggest corporate deal of all time - will create the world's biggest drug maker by sales, with US firm Pfizer effectively swallowing up Allergan (NYSE: AGN - news) for $160bn (£106bn).

But the takeover of Dublin-based Allergan is likely to generate significant controversy since it will be the biggest ever "inversion" deal.

This means that Pfizer's tax domicile relocates offshore, thereby taking advantage of Ireland (Other OTC: IRLD - news) 's much lower corporate tax regime. The company's shares will be listed in New York where it will have its global operational headquarters.

President Barack Obama and Congress have criticised inversions because they mean a loss of corporate tax revenue for the US government.

On Monday, the White House declined to comment on Pfizer's acquisition of Allergan, but said US lawmakers should take legislative steps to prevent deals where companies lower their taxes by reincorporating overseas.

Democratic presidential candidates Hillary Clinton and Bernie Sanders both slammed the deal, with Mrs Clinton saying it would leave "US taxpayers holding the bag".

Mr Sanders called on Mr Obama to intervene, saying the merger would be a "disaster" for US consumers paying high prescription drug costs.

The deal is to be structured as a "reverse merger" with Allergan taking over Pfizer, which should prevent the Obama administration from scuppering it.

Despite the "reverse" nature of the deal, Ian Read, Pfizer's Scottish-born boss, will head the combined company with Brent Saunders, his counterpart at Allergan, becoming chief operating officer.

The deal terms mean 11.3 shares in the combined company for each Allergan share - worth about £240 each. Pfizer stockholders will receive one share.

With (Other OTC: WWTH - news) a market value in excess of £200bn, the combined company, dubbed "Pfizergan" would surpass Johnson & Johnson (NYSE: JNJ - news) as the world’s largest healthcare group.

It (Other OTC: ITGL - news) would have annual revenues of nearly £43bn, derived from drugs including Pfizer's widely known Viagra and Botox, the wrinkle treatment made by Allergan.

The deal is also expected to deliver cost savings of more than $2bn (£1.3bn) within the first three years of completion.

It is expected to complete in the second half of 2016, subject to approval by shareholders, regulators in the US and EU as well as the completion of the sale of a division of Allergan's business to another drugs firm.

Mr Read said: "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."

Mr Saunders said: "This bold action is the next chapter in the successful transformation of Allergan allowing us to operate with greater resources at a much bigger scale."

The deal comes after UK-based AstraZeneca last year fought off a controversial takeover attempt by Pfizer, saying its £69bn valuation undervalued the business (Other OTC: UBGXF - news) .