Allergan Inc.'s Botox Cosmetic As Actavis Plc Buys Drugmaker For $66 Billion
A deal would be the biggest merger of the year, and take the value of pharma M&A this year over $1 trillion. Photograph by Jason Alden — Bloomberg via Getty Images

When Viagra met Botox: Pfizer, Allergan eye mega-merger

Updated: Oct 29, 2015 10:11 AM UTC

Pfizer Inc. (pfe) and Allergan Inc. (agn) are considering a merger that would create a drugs giant worth over $300 billion, according to The Wall Street Journal and The Financial Times.

If it comes off, the merger, would top off a blockbuster year for M&A in the pharmaceuticals sector this year that has seen over $800 billion worth of deals. Today's Allergan, with a market capitalization of $112 billion, is itself the product of five major deals since 2012, including, only 11 months ago, a $66 billion deal with Actavis (read more about Allergan's deal-driven evolution here). Pfizer's market cap is around $217 billion. Together, they would eclipse Johnson & Johnson (jnj) as the world's largest healthcare company.

The pharma sector's merger frenzy has been driven as much as by financial engineering as by the search for scale in a U.S. healthcare market rapidly evolving under the influence of the Affordable Care Act. One of the chief attractions of Allergan for Pfizer is its domicile in Ireland--the FT noted that Allergan had an effective tax rate of 4.8%, compared to Pfizer's 25.5%. Pfizer had previously tried to shift its tax domicile abroad last year by buying U.K.-based AstraZeneca, but political and investor concerns scuppered the deal.

The WSJ reported that Pfizer, the maker of erectile dysfunction drug Viagra and Lipitor, once the world's best-selling statin, approached Allergan recently, but said the process is still at an early stage and may not yield an agreement. Allergan's best-known product is anti-wrinkle treatment Botox.