NEW YORK • Pfizer is said to be in advanced talks to buy Allergan for as much as US$380 a share, valuing the Botox maker at as high as US$150 billion (S$214 billion), in what would be the drug industry's largest deal, so far.
The companies aim to announce a deal by Monday, according to people familiar with the matter, who asked not to be identified because the discussions are private. The price being discussed is US$370 to US$380 a share, two of the people said.
However, the United States Treasury Department's letter on tax inversion deals, released on Wednesday, could delay the final agreement and change the terms of any transaction, another person said.
There have been a flurry of pharmaceutical and biotech mergers this year, already surpassing last year's record of US$220 billion in deals, according to data compiled by Bloomberg.
Buying Allergan, which has its legal domicile in Dublin, could let New York-based Pfizer relocate outside the US for tax purposes, a transaction known as an inversion.
"We struggle to see what the Treasury can do to specifically curb" a combination of the two companies, Citigroup analysts said in a note on Wednesday.
Still, the "political noise" that would surround Pfizer's relocation "constitutes the most material hurdle to consummation of a transaction of this nature".
Chances of the deal going through hinge more on "what price Allergan's willing to take and also, we don't know if there's pressure from the White House in the background", said Evercore ISI analyst Umer Raffat. The Treasury Department does not have the power to block an inversion, but it could reduce the economic benefits of such a deal, he said.
A deal at US$380 a share would be the largest acquisition this year in any industry, and would surpass Pfizer's US$116 billion purchase of pharma giant Warner-Lambert in 2000 as the biggest transaction between drug companies, the Bloomberg-compiled data shows.
The transaction would strengthen Pfizer's brand-name drug business and could pave the way for an eventual split in two. Allergan's market value of US$122 billion could also allow the US drugmaker to transfer its headquarters to Ireland.
The move requires a large foreign target in order to clear US tax rules, and was one of the reasons Pfizer sought to acquire AstraZeneca last year, before eventually withdrawing its proposal. The Treasury Department is reviewing ways to address these overseas acquisitions, and plans to issue guidance later this week to reduce the economic benefits of tax inversions.
Allergan's portfolio, which includes top-selling brands like the anti-wrinkle injection Botox and the Alzheimer's drug Namenda, would help beef up Pfizer's brand-name drug business.