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Merger of Viagra Maker and Allergan Could Be Biggest of 2015

By Jonathan R. Tung, Esq. on October 30, 2015 | Last updated on March 21, 2019

Share prices of Allergan exploded out of the opening bell and topped out with an almost 8 percent gain over the stock's closing. It's been a good several trading days for the Ireland-based pharmaceutical company.

The lastest jump in prices has been attributed to "preliminary friendly discussions" regarding Pfizer's proposed takeover of Allergan. If the deal goes through, it stands poised to be largest takeover deal of 2015.

Allergan's Climb

Yesterday, Allergan's share price had been trending upwards steadily over the last few trading days -- amounting to about 22% in gains according to CNN Money. The company's market capitalization is estimated at north of $110 billion; with Pfizer at twice that number. If the takeover proceeds as planned, the Pfizer-Allegen deal would result in the largest pharmaceutical company on the planet, wrenching that crown from Johnson & Johnson.

Pzifer on the Prowl

This is not the first time in recent history the maker of the famed blue pill has tendered an offer to rival pharma-companies. In 2014, Britain's AstraZeneca repeatedly parried takeover blows from Pfizer when the board rejected Pfizer's bids as being too low. Way back in the day, Pfizer gobbled up Pharmacia for $60 billion -- a rather impressive number at the time.

Tax Advantages?

Aside from bragging rights of being the largest pill company on planet earth, analysts are quick to point out that Pfizer's books will enjoy $1.4 billion in tax savings if the deal goes through.

In fact, more cynical readers will have aleady concluded that Pfizer's shopping of Allergan can hardly be called coincidental. Since AtraZenca turned did not pan out, Allergan was the next logical choice. Why? Allergan is an Irish Corporation and enjoys significantly lower corporate tax exposure in that country. If the deal moves forward, as Pfizer's lawyers, board and shareholder anticipate, Pfizer will then be able to move its HQ to the United Kingdom -- specifically, Ireland.

Giant American Tech companies were the pioneers in this corporate tax avoidance technique. Although, it may be too soon to speak: the Double Irish tax loophold trick that had been so cherished by the likes of Google and Apple might be going the way of the dinosaur.

We're betting something else will take its place. That sound you hear? General counsel scanning papers for any loopholes.

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