Allergan Confirms Merger Talks with Pfizer

Allergan and Pfizer Inc. confirmed Thursday that they are in talks about a potential combination, in what would be a blockbuster merger capping off a torrid stretch for health-care and other takeovers. The drug makers, in separate statements using similar wording, said they are in "preliminary friendly discussions" about a potential tie-up. The companies said no agreement has been reached and noted there could be no certainty that a deal would be consummated. The Wall Street Journal had reported on the talks Wednesday. Allergan, based in Dublin, and Pfizer disclosed the talks Thursday under Irish takeover rules. Allergan added that it remains committed to divesting its global generics business to Teva Pharmaceutical Industries Ltd. Allergan had a market capitalization Wednesday of about $113 billion, meaning that a deal for the company could be the biggest announced takeover in a year that is already on pace to be the busiest ever for mergers and acquisitions. Shares of Allergan jumped 8.9% to $312.85 in Thursday morning trading, while Pfizer shares slid 0.8% to $35.18. Pfizer's market cap, through Wednesday, was about $219 billion. A tie-up with Allergan could be a way for New York-based Pfizer to lower its corporate tax rate. Allergan, because it is based in Dublin, has a significantly lower tax rate than companies in the U.S. In an interview Thursday, Pfizer Chief Executive Ian Read said Pfizer is at a "tremendous disadvantage" under the U.S. corporate tax code and that his company is competing against foreign companies "with one hand tied behind my back." Mr. Read, speaking at The Wall Street Journal's Viewpoints discussion series, declined to comment on the company's interest in Allergan. J.P. Morgan analyst Chris Schott estimated in a research note Thursday that a combination could drive around $2 billion in operating synergies for Pfizer. Mr. Schott sees overlap in the companies' primary care infrastructures and women's health and central nervous system divisions. A deal would also boost the "innovative products" business that Pfizer has focused recently on growing. Allergan has launched a number of new products recently, such as the double-chin treatment Kybella, while its older drugs like Botox continue to see double-digit growth.