“Synergies of $2 billion plus in the third year are less than the $4 billion we had estimated in year 1,” says Cowen and Co analyst Steve Scala.
On a conference call with analysts, Pfizer said the merger would give it enhanced access to its tens of billions of dollars parked overseas and allow for more share buybacks, dividend payments and business development. The combined company would have annual sales of about $64 billion.
It was not immediately clear how many jobs would be lost as a result of the deal, which is expected to close in the second half of 2016.
Tax Savings
Allergan CEO Brent Saunders will become president and chief operating officer of the combined company, with oversight of all commercial businesses.
Read, who has long sought to slash Pfizer’s U.S. tax rate, said the deal would help put the company on “on a more competitive footing” with overseas-based rivals.
The company had estimated it would pay about 25% in corporate taxes this year, compared with about 15% for Allergan. Pfizer Chief Financial Officer Frank D’Amelio says he expected a combined tax rate of 17% to 18% by 2017.
The deal comes some 18 months after the failure of Read’s initial attempt at an inversion, a $118 billion bid to acquire Britain-based AstraZeneca Plc. that ran into stiff opposition from that company’s management and U.K. politicians.
Saunders said the combination would provide access to about 70 additional worldwide markets for Allergan products, such as Botox wrinkle treatment, Alzheimer’s drug Namenda and dry-eye medication Restasis.
For 166-year-old Pfizer, Allergan would be the fourth huge acquisition over the last 15 years—one for each of the last 4 CEOs—following purchases of Warner-Lambert, Pharmacia and Wyeth.
This also caps a record year for healthcare mergers and acquisitions, taking their cumulative value in 2015 to more than $600 billion.
They include prior big deals involving Saunders, such as the $70.5 billion acquisition of Allergan by Actavis, which then took the Allergan name, and an agreement to sell that company’s huge portfolio of generic drugs to Teva Pharmaceutical Industries for $40.5 billion.
Allergan and Pfizer estimated their merger would increase earnings per share by 10 percent, excluding special items, in 2019 and add by a high-teens percentage rate in 2020.
The deal values Allergan shares at $363.63 each, about 16% more than their closing price of $312.46 on Friday. Pfizer shareholders would control of 56 percent of the combined company. The record-breaking deal includes $8 billion in debt, Pfizer says.