After weeks of talks, Pfizer and Allergan have agreed on a blockbuster merger worth $150 billion.
The companies’ boards of directors reportedly approved the deal Sunday, and details were expected to be announced Monday, according to the Wall Street Journal. The deal caps a remarkable consolidation wave roiling the U.S. health care industry and creates the world’s biggest drugmaker by sales.
The deal between Pfizer Inc. and Botox maker Allergan is the largest corporate merger this year. As of Friday’s close, Pfizer had a market cap of $199 billion; Allergan was at $123 billion.
The Pfizer-Allergan deal is likely to fuel critics’ concerns that consumers would pay even more for drugs as competition declines among manufacturers, insurers and retailers. And it places the firms squarely in a presidential election debate over efforts by U.S. companies to obtain lower tax rates by using mergers to move their headquarters abroad.
The final terms of the deal include 11.3 Pfizer shares for every Allergan share, the Journal said, citing unidentified sources. The deal also includes a small cash component, the paper reported. It said Pfizer Chief Executive Ian Read will lead the combined company and that Allergan CEO Brent Saunders will be second-in-command.
A month ago, Allergan, which is based in Ireland and has a sizable operation in Irvine, California, said it was approached by Pfizer but cautioned that there was “no certainty” that the “friendly” discussions would lead to a merger. Pfizer confirmed the talks.
The deal caps a merger spree throughout the U.S. health care industry this year, which already has seen a record $448 billion in announced deals, according to Dealogic, which tracks the market.
Health care companies of all stripes are joining forces to reposition themselves as various market and government forces, notably the Affordable Care Act, have complicated the growth outlook for the companies’ revenues and profits.
For instance, two of the nation’s three largest drugstore chains, Walgreens and Rite Aid, announced a $9.4 billion merger in October. In July, Anthem reached a $54 billion deal to buy rival Cigna to create the largest U.S. health insurance company.
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