Two large drugmakers, U.S.-based Pfizer and Ireland's Allergan, joined forces Monday, creating the world's biggest drug manufacturer.
The $160-billion stock deal will push the combined companies, to be called Pfizer Plc and based in Ireland, past Switzerland's Novartis to the top of the drug industry, based on annual sales of about $60 billion. The companies expect the deal will be completed by the second half of 2016, but antitrust regulators around the world will have to approve it.
The merger was driven by tax considerations, with Pfizer carrying out what is known in the U.S. business world as a tax inversion deal. The practice involves an American company combining with a business located in a foreign country with a lower corporate tax rate, potentially saving millions of dollars annually in U.S. taxes.
Analysts say that with the Pfizer-Allergan merger, Pfizer could cut its annual tax rate from 25 percent in the United States to between 17 and 18 percent in Ireland. U.S. efforts to rein in such deals have proved largely ineffective and many companies have joined with overseas partners to cut their tax bills.
Pfizer and Allergan produce some of the world's best known drugs. Among many other drugs, Pfizer manufactures pneumonia vaccine Prevnar, erectile dysfunction drug Viagra, and cholesterol fighter Lipitor, while Allergan makes wrinkle-controlling Botox, dementia-inhibitor Namenda and the anti-depressant Fetzima.