Pfizer-Allergen Merger

Discussion in 'General Trading Discussion' started by Rainman, Nov 26, 2015.

  1. Rainman

    Rainman Senior Investor

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    US-based Pfizer and Ireland's Allergan will be merging. The deal which is expected to close by 2016 would make the new company the world's largest drug manufacturer. How that will affect their earnings remains to be seen.

    http://rapidnewsnetwork.com/pfizer-deal-to-purchase-allergan-could-close-by-end-of-2016/312801/
    Allergan CEO Brent Saunders will become president and chief operating officer of the combined company with oversight of all commercial businesses. Pfizer shareholders would control of 56 percent of the combined company . . . the tactic is primarily motivated by the disparity between the US’s high 35% corporate rate and the UK’s 20% rate, brought in by the coalition to attract additional business to the UK.
     
  2. baudwalk

    baudwalk Senior Investor

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    Many questions remain, including politics. The Treasury announced new regulations last week that would impact this inversion. Clinton is making campaign statements to the effect that she would stop the merger from happening. All that remains to be seen. Given that $PFE is buying $AGN for $363 a share, at first glance it seems logical to buy $AGN at ~$311 for 11.3 shares of $PFE and enjoy an immediate $50 per $AGN share profit to be reaped in 3Q2016. From my reading, watching some business shows and some correspondence with acquaintances I sense an undercurrent of uncertainty. I can't say what, if any, the stumbling blocks might be and I haven't made a decision on what to do. Certainly $PFE at its ~$31 price level is a safe investment but it's not an exciting investment. One could say slow and steady wins the race with a modestly decent dividend.

    This inversion is symptomatic of the larger tax issue with the US tax code. Aside from from the social engineering obscenities within the personal tax code, the corporate tax code is blatantly too high compared to other nations. The tax on repatriation of overseas profits is attrocious, as is the double-taxation of dividends. Will Congress do anything about it? Bleh, not in my lifetime.
     
  3. JR Ewing

    JR Ewing Super Moderator Staff Member

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    Buy the rumor, sell the news. I bought in the low $200's in 2014, sold not long ago north of $300.

    RE the inversion, it never seems to occur to Democrats that the reason companies go overseas is because we have the highest corporate tax rate in the civilized world, and that these companies have a fiduciary responsibility to their shareholders to take such measures in order to maximize shareholder value.

    Loons like Liz Warren want US companies to pay even MORE. :rolleyes:
     
  4. crimsonghost747

    crimsonghost747 Senior Investor

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    M&A has been huge in the pharmaceutical industry lately and shows no sign of slowing down.

    I'm starting to get a little sceptical as it seems like companies are having a hard time growing themselves. I've been looking at Teva for a while but they are facing the same issue.
     
  5. GiltEdged

    GiltEdged Active Member

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    The Pfizer-allergen deal was called off this afternoon. It seems that as the new company would have been headquartered in Ireland to take advantage of lower tax rates, it fell foul of the tax regulations announced on Monday. Apparently they are designed to stop a company merging purely to avoid tax.

    This is Pfizer's second failed attempt at buying out another firm, after its failed bid for AstraZeneca in 2014, but these tax regulations might make it hard for it to attempt another takeover if the result would be quartered overseas.
     
  6. kgord

    kgord Senior Investor

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    Well I guess Pfizer is going to not make any moves like that in the near future. They don't seem to be able to get it together business wise and their failure to be able to take over other companies seems to be something that is not going to work for them. It sounds like they need to get better business advisors or accountants on their side.
     
  7. rz3300

    rz3300 Guest

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    Well I think that having the world's largest drug company will certainly have some implications when it comes to prices. I am going to assume that they hare negative implications as well, because I am going to say that a larger company will have less competition and it really seems like a move towards monopoly, which is never a good thing. I am curious to see where this goes, and so I will be staying on top of this story.
     

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