Pfizer said to be in $150-bn merger talks with Allergan

Merger talks between US pharmaceutical giant Pfizer Inc and Irish drug maker Allergan Plc are said to be underway to create a global pharmaceutical behemoth worth over $300 billion, with the former looking to re-locate its base to Ireland amid US treasury's clamp down on tax inversions, US media reported yesterday.

Citing sources familiar with the matter, The Wall Street Journal reported last month early stage talks between the two giants to create the world's largest drug company, displacing healthcare giant Johnson & Johnson to the second spot. (See: Pfizer, Allergan mull largest pharma merger).

Allergan Inc, focused on eye care, neurosciences and aesthetics, was acquired by Swiss pharma giant Actavis Plc in 2015.

Later, the company was renamed to Allergan Plc, with its headquarters in Dublin, while most of its operations are in New Jersey.

The negotiations are centered on a price tag of $370-$380 per share of Allergan, Reuters reported citing an unidentified person familiar with the discussions.

The price range is about 20 per cent higher than Allergan's closing price of $310.38, which was up 4.4 per cent yesterday in New York. Pfizer stock ended 1.3 per cent up at $33.30.

Pfizer has a market capitalisation of $203 billion and Allergan $117 billion, while biggest rival Johnson & Johnson's market value is $281 billion, followed by Novartis AG $238 billion and Roche $234 billion.

The timing of a formal deal is not known, as the treasury seeks to tighten tax rules to rein in tax inversions by big corporates.

"Later this week, we intend to issue additional targeted guidance to deter and reduce further the economic benefits of corporate inversions,'' Reuters reported quoting a treasury document signed by secretary Jack Lew and addressed to senior law makers.

A corporate inversion is a transaction in which a US-based multinational company resorts to restructures so that the US parent is replaced by a foreign parent based in a low-tax country, in order to avoid US taxes.

Last year, the US treasury took a series of measures to rein in corporate inversions, which were then t peak.

The actions included restrictions on accessing foreign subsidiary's earnings, restructuring subsidiaries to access tax-free earnings, transfer of cash and property, as well as strengthening ownership requirements.

''The fact that American companies, including Pfizer, continue to pursue inversions makes clear that additional steps are needed to stop this trend," Sander Levin, member of US house of representatives and house tax committee said.

He urged the congress to get off the sidelines and take action to change the law to stop these tax motivated inversions.

A deal between New York-based Pfizer and Dublin-based Allergan will mark further consolidation in the global pharmaceutical industry as drug makers struggling with margins and patent expiries, seek to access new drugs and step up controls on pricing.