Pfizer back on merger trail as it starts talks with Allergan

A deal with Allergan would create the world’s largest healthcare group with a value of $330bn

Clare Hutchison
Friday 30 October 2015 02:02
Lipitor and Viagra pills
Lipitor and Viagra pills

The American pharmaceuticals giant Pfizer is on the prowl again and has the Botox maker Allergan in its sights, in what could be the biggest merger in a bumper year for deals in the sector.

Pfizer, which makes the blockbuster drugs Lipitor and Viagra, recently approached the Dublin-based Allergan about combining, the two companies have confirmed.

The move follows Pfizer’s failed hostile attempt to buy Britain’s AstraZeneca for £69.4bn last year.

A deal with Allergan, which is valued at about £74bn, would create the world’s largest healthcare group with a market value of about $330bn (£215bn), overtaking Johnson & Johnson.

It could also offer some of what Pfizer missed out on in the collapse of the AstraZeneca deal – a way to lower its tax bill by switching its headquarters to a lower-tax regime. It would also strengthen Pfizer’s stable of patent-protected drugs and boost growth.

Shares in Allergan rose 6 per cent to $304.38 on the New York Stock Exchange after the group said it was in preliminary friendly talks with Pfizer, although it stressed there was no certainty the discussions would lead to a deal. There were no details about the terms of a possible merger.

However, shares in GlaxoSmithKline, which has also been mooted as a possible merger partner for Pfizer, fell 1.2 per cent to 1,404p in London. Pfizer shares fell 1 per cent to $35.14.

The US group’s chief executive, Ian Read, declined to comment directly on reports of talks with Allergan, but he told Reuters he was open to a deal “if that would add value to shareholders”.

“Or we could sit tight or we could do a split. Or we could do a business development deal and then do a split – whatever produces the best long-term value,” Mr Read said.

A deal will Allergan would help lift Pfizer’s sales, which are expected to fall by more than 3 per cent this year. In contrast, analysts expect Allergan’s revenues to rise by nearly 40 per cent.

An attempted tie-up would be the latest in a long list of potential deals in the healthcare sector.

Earlier this year Pfizer bought Hospira for $16bn, while AbbVie’s attempt to purchase Shire collapsed amid a US crackdown on tax-avoidance deals. Shire has since agreed to buy the biotech firm NPS Pharmaceuticals for $5.2bn and is pursuing Baxalta after making a $30bn bid.

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