But despite the historic news, the PFE stock price was down 2.3% today. Allergan stock was down 3%.
In a record-breaking $160 billion merger, the Pfizer-Allergan combination will create the world's largest drugmaker. The union is also the biggest transaction to date using a controversial tax-saving strategy known as an "inversion."
Through the deal, Pfizer will be domiciling in Dublin. Pfizer expects the combined firm to have an adjusted tax rate between 17% and 18%. That's significantly lower than the current 25% rate it has in the United States. Pfizer's current rate is among the highest in the industry.
Pfizer Chief Executive Ian Read has been outspoken against high U.S. corporate tax rates. Read maintains the country's hefty rates put American-based companies like Pfizer at a competitive disadvantage to their overseas rivals.
This deal enables "our pursuit of business-development opportunities on a more competitive footing within our industry," Read said in statement Monday.
Under terms of the deal, Allergan shareholders will receive 11.3 shares of the newly combined company for each of their outstanding shares, and Pfizer investors will get one share of the new company for each of their shares. Shares will trade under Pfizer's current ticker "PFE."
The all-stock transaction values Allergan at $363.63 per share.
The merger creates a pharmaceutical goliath with more than $60 billion in combined sales and an unrivaled R&D unit. And it should be a bullish catalyst for the PFE stock price as we head into 2016...
Why the PFE Stock Price Should Continue Climbing
The duo will have a variety of top-selling products under its vast umbrella.
The combined company's drugs and vaccines will cover diseases ranging from Alzheimer's to cancer to eye health to rheumatoid arthritis.
These include Pfizer's Prevnar pneumonia vaccine, erectile-dysfunction medication Viagra, and the cholesterol-lowering drug Lipitor. Allergan's top-selling brands include cosmetic medication Botox and the dry-eye treatment Restasis.
The two said the combined company would have more than $25 billion in operating cash flow starting in 2018.
The union will give Pfizer greater financial flexibility to pursue new investments, drug discoveries, and developments. It will also allow the company to return more capital to shareholders.
The deal will be neutral to Pfizer's adjusted per-share earnings in 2017, add modestly to them in 2018, and boost them by about 10% in 2019. By 2020, Pfizer expects the transaction to increase adjusted profit between 15% and 19%.
For Allergan, the combination will allow it to expand its sales predominantly in the United States to other international markets.
The deal is expected to close in the first half of 2016.
Pfizer and Allergan said that after the deal closes, the combined company will decide on splitting into two businesses. One will focus on patent-protected products and the other on drugs that have lost their patent protection or are close to losing it. It expects to make that decision by the end of 2018.
The PFE stock price is up 0.5% in 2015 and 86% in the last five years. PFE stock opened today at $31.42 per share.
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