Pfizer, Allergan agree to merger

The combined companies' will produce major drug brands like Viagra, Celebrex, Botox and Juvéderm and generate roughly $63 billion in combined sales.

With these figures, and based on the current exchange rate between the euro and the dollar, Pfizer would have paid €620m in corporate tax had it fallen under the Irish tax regime a year ago - significantly less than it would have had to pay under the tax regime in its native US. According to a source close to the deal Pfizer wanted to beat implementation of US Treasury measures which will make it more hard for US companies to escape taxes via a merger which moves their tax home overseas a mechanism called a 'tax inversion.' The US company has a large war chest of foreign earnings which it does not want to repatriate to the United States where it would then have to pay taxes on the sums.

In afternoon trade, shares of Pfizer dropped 2.5 percent to $31.38 and Allergan fell 2.8 percent to $303.62. The merger would create the largest drug maker in the world but bring lower cost savings than both had hoped for. That decision, which could sell off Pfizer's lower margin unit of products facing generic competition, was expected by late 2016.

US President Barack Obama meanwhile has called inversions unpatriotic.

A month ago, Allergan, which is based in Ireland and has a sizable operation in Irvine, Calif., said it was approached by New York-based Pfizer but cautioned that there was "no certainty" that the "friendly" discussions would lead to a merger.

The transaction will expand Pfizer's offerings, which will include additions like Allergan's Botox and Kythera's Kybella. The deal is expected to provide those benefits as well as $2 billion in estimated operational synergies in the first three years of the deal closing. Allergan's corporate headquarters is in Dublin, Ireland, and merging with the firm would significantly lower Pfizer's corporate tax bill.

Republican presidential candidate Donald Trump told Business Insider, "The fact that Pfizer is leaving our country with a tremendous loss of jobs is ..."

Allergan investors will receive 11.3 shares of the new company for each Allergan share for a total, now valued at $505.77 per share, more than a 30 per cent premium prior to news reports of the tie-up talks.

Pfizer and Allergan will be combined under Allergan PLC, which will be renamed Pfizer PLC.

The deal is a victory for Read, who in 2014 sought an inversion transaction with AstraZeneca, but was repeatedly rebuffed by the British company, which said Pfizer had undervalued its business. Pfizer shareholders would receive one share in the combined company for each share they hold, but they have the option to take up to $12 billion in cash for some or all of their shares instead.

Pfizer ($PFE) may be amped about its brand-new agreement to tie up with Allergan ($AGN) and move to tax-advantaged Ireland.