Pfizer Inc. and Allergan Plc may announce an agreement as early as Monday to combine into a single new company, according to a person familiar with the matter.
The deal, valued at more than $150 billion, would be the largest one ever in the rapidly consolidating pharmaceutical industry.
The boards of the companies are expected to sign off on the accord Sunday, said the person, who asked not to be named because the discussions are private.
Pfizer will give 11.3 shares for each Allergan share, said the person. The deal is structured so that Allergan is technically buying its much larger partner, a move that may make it easier for the company to locate its tax address in a lower-cost country. Based on Friday’s closing price of a Pfizer share, the agreement gives investors a premium of about 27 percent above Allergan’s stock price on Oct. 28, before news of the companies’ discussions became public. Pfizer shareholders will get a small cash amount, the person said.
Pfizer’s talks with Allergan come more than a year after the U.S. firm abandoned a bid to acquire AstraZeneca (AZN.L) and move its tax headquarters to Britain. The U.S. Treasury last year, and again last week, updated its rules on inversions to make it harder for companies to avoid U.S taxes by moving overseas. But experts have said these moves would do little to prevent Pfizer from inverting. Many industry analysts and investors believe Pfizer could be bulking up with Allergan's fast-growing brands as a prelude to splitting by 2017 into two companies - one selling high-margin branded drugs and one selling inexpensive generics that have dragged down Pfizer results over the past few years.