The Wall Street Journal and The Financial Times have reported that the two companies are considering a merger that could create the largest drug-maker in the world. A deal would result in an entity worth in excess of $300 billion, surpassing Johnson & Johnson, which is currently valued at $277 billion.
According to BioWorld.com, Allergan has confirmed that the two sides are in negotiations.
The Times reported that a purchase of Allergan, which is best known as the maker of Botox, would enable allow Pfizer to fulfill a longtime goal: a “tax inversion” that would reduce its U.S. corporation tax bill. Ireland-based Allergan paid an effective tax rate of 4.8% in 2014 versus Pfizer’s 25.5%.
A Pfizer adviser recently told the Times that Pfizer CEO Ian Read believes that a takeover of Allergan—which is still seen as a U.S. company despite its Irish base—would result in fewer political problems than a purchase of GlaxoSmithKline, which often is seen as a potential target.
Pfizer last year attempted a $118 billion takeover of U.K.-based AstraZeneca. It only withdrew because of opposition from AstraZeneca’s management, as well as British media and politicians.
The Times also noted that analysts and investors often have called for a Pfizer-Allergan deal, with some major shareholders suggesting that Allergan CEO Brent Saunders could replace the 62-year-old Read when the latter retires.