Pfizer And Allergan To Merge In $160 Bln Deal

(RTTNews) - Pfizer Inc. (PFE) and Allergan plc (AGN) announced that they have entered into a definitive merger agreement by which Pfizer will combine with Allergan in a stock transaction currently valued at $363.63 per Allergan share, for a total enterprise value of approximately $160 billion, based on the closing price of Pfizer common stock of $32.18 on November 20, 2015.

The transaction represents more than a 30 percent premium based on Pfizer's and Allergan's unaffected share prices as of October 28, 2015.

Allergan shareholders will receive 11.3 shares of the combined company for each of their Allergan shares, and Pfizer stockholders will receive one share of the combined company for each of their Pfizer shares.

Pfizer stockholders will have the opportunity to elect to receive cash instead of stock of the combined company for some or all of their Pfizer shares, provided that the aggregate amount of cash to be paid in the merger will not be less than $6 billion or greater than $12 billion.

In the event that the aggregate cash to be paid in the merger would otherwise be less than $6 billion or greater than $12 billion, then the stock and cash elections will be subject to proration.

Following the transaction, and assuming that all $12 billion of cash is paid in the merger, it is expected that former Pfizer stockholders will hold approximately 56% of the combined company and Allergan shareholders will own approximately 44% of the combined company on a fully diluted basis.

Pfizer plc's board is expected to have 15 directors, consisting of all of Pfizer's 11 current directors and 4 current directors of Allergan. The directors from Allergan will be Paul Bisaro, Allergan's current Executive Chairman, Brent Saunders, Allergan's current Chief Executive Officer, and two other directors from Allergan to be selected at a later date.

Ian Read, Pfizer's Chairman and CEO, will serve as Chairman and CEO of the combined company. Brent Saunders will serve as President and Chief Operating Officer of the combined company. He will be responsible for the oversight of all Pfizer and Allergan's combined commercial businesses, manufacturing and strategy functions.

As per the terms of the proposed transaction, the businesses of Pfizer and Allergan will be combined under Allergan plc, which will be renamed "Pfizer plc." The companies expect that shares of the combined company will be listed on the New York Stock Exchange and trade under the "PFE" ticker.

Upon the closing of the transaction, the combined company is expected to maintain Allergan's Irish legal domicile. Pfizer plc will have its global operational headquarters in New York and its principal executive offices in Ireland.

As a result of the combination with Allergan and subsequent integration of the two companies, Pfizer now expects to make a decision about a potential separation of the combined company's innovative and established businesses by no later than the end of 2018.

Pfizer anticipates the transaction will deliver more than $2 billion in operational synergies over the first three years after closing. The transaction is expected to be neutral to Pfizer's Adjusted earnings per share in 2017, modestly accretive beginning in calendar year 2018, more than 10% accretive in 2019 with high-teens percentage accretion in 2020.

These expectations include the impact of expected share repurchases following the transaction. The combined company is expected to generate annual operating cash flow in excess of $25 billion beginning in 2018.

The transaction is not expected to have an impact on Pfizer's existing dividend level on a per share basis. It is expected that the combined company will use its combined cash flow to continue to support an attractive dividend policy, targeting a payout ratio of approximately 50% of adjusted earnings per share.

Independent of the transaction and consistent with 2015, Pfizer anticipates executing an approximately $5 billion accelerated share repurchase program in the first half of 2016. Pfizer has approximately $5.4 billion remaining under its previously announced repurchase authorization.

The completion of the transaction, which is expected in the second half of 2016, is subject to certain conditions, including receipt of regulatory approval in certain jurisdictions, including the United States and European Union, the receipt of necessary approvals from both Pfizer and Allergan shareholders, and the completion of Allergan's pending divestiture of its generics business to Teva Pharmaceuticals Ltd., which Allergan expects will close in the first quarter of 2016.