Pfizer and Allergan to Combine

25-Nov-2015 - USA

Pfizer Inc. and Allergan plc announced that their boards of directors have unanimously approved, and the companies have entered into, a definitive merger agreement under which Pfizer will combine with Allergan for a total enterprise value of approximately $160 billion, based on the closing price of Pfizer common stock on November 20, 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.

Under 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.

Financial Highlights

Pfizer anticipates the transaction will deliver more than $2 billion in operational synergies over the first three years after closing. Pfizer anticipates that the combined company will have a pro forma Adjusted Effective Tax Rate 1 of approximately 17%-18% by the first full year after the closing of the transaction. The transaction is expected to be neutral to Pfizer’s Adjusted Diluted EPS 1 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 Diluted EPS. 1

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.

Transaction Details

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.

Governance and Leadership

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 (CEO), 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.

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