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Pfizer Inc. and Allergan PLC agreed on a historic merger deal worth more than $150 billion that would create the world's biggest drug maker and move one of the top names in corporate America to a foreign country.

The boards of each company ratified the deal Sunday and it could be announced Monday, according to people familiar with the matter. The final terms include 11.3 Pfizer shares for every Allergan share and the deal also contains a small cash component, they said.

The takeover would be the largest so-called inversion ever. Such deals enable a U.S. company to move abroad and take advantage of a lower corporate tax rate elsewhere, and have remained popular in the face of U.S. efforts to curb them.

To help secure that lower tax rate, the deal will be technically structured as a reverse merger, with Dublin-based Allergan, which is smaller, buying New York-based Pfizer, according to the people.

Pfizer Chief Executive Ian Read will lead the combined company with Allergan CEO Brent Saunders serving as his No. 2, with the titles of president and chief operating officer, some of the people said. Other Allergan executives are expected to join the firm, too.

Mr. Read has railed against high U.S. corporate tax rates, which he says puts American-based companies like Pfizer at a competitive disadvantage to their overseas rivals. Pfizer's tax rate is about 25%, the highest among its Big Pharma peers, according to Evercore ISI.

Last year, Pfizer tried to ink a tax-lowering deal for AstraZeneca PLC but its British rival rejected the overtures, sending Mr. Read back to the drawing board.

In hooking up with Allergan, Pfizer would lower its tax rate below 20%, analysts estimate. Allergan, itself the product of a tax-lowering inversion deal, has a roughly 15% tax rate.

The combination will also create a pharmaceutical behemoth, with top-selling products including Pfizer's Prevnar pneumonia vaccine and Allergan's antiwrinkle treatment Botox, and an industry-topping R&D budget.

The company's drugs and vaccines would cover a range of diseases, from Alzheimer's to cancer, eye health to rheumatoid arthritis.

The deal would bring together two pharmaceutical powerhouses with more than $60 billion in combined sales. Last year, Actavis, which bought Allergan and took its name, had more than $13 billion in sales, while Pfizer had nearly $50 billion in revenue.

Pfizer could benefit from the faster growth of Allergan. After coping with sales lost when blockbusters like cholesterol-fighter Lipitor faced generic competition, Pfizer has notched successes launching new drugs like breast-cancer tablets Ibrance.

Yet Allergan has been growing at a faster rate, partly thanks to Botox and its other aesthetic-medicine products, which dominate a market that Allergan forecasts will double to $10.5 billion by 2020.

In addition, Allergan predicts that it could launch more than a dozen new products, including drugs for age-related macular degeneration and depression, over the next several years that could add more than $15 billion in sales.

The combined company will have more resources to devote to drug research and development.

The deal comes days after the Treasury Department released new rules aiming to curb tax-lowering inversion deals. Analysts said the rules didn't appear to be able to thwart a combination of Pfizer and Allergan, though the risk of government action remains.

For the deal to go forward, the companies will have to receive approval from antitrust regulators around the world.

The combination would further the rapid pace of consolidation in health care, in which companies of all stripes—from insurers to hospitals—have been linking arms to position themselves better in an environment of dramatic change as a result of the Affordable Care Act and other developments.

Drug companies, especially midsize companies, have been aggressive at M&A in recent years in order to build the heft needed to negotiate strongly with health plans, drug-benefit managers and hospitals over the price of medicines.

Aside from giving Pfizer the opportunity to lower its corporate tax rate, the deal would increase its sales growth and afford cost-cutting opportunities. For Allergan, meantime, a combination will allow it to take sales, which are predominantly in the U.S., to other international markets.

Allergan itself is the result of a number of mergers in quick succession. It started off as a generic-drug company called Watson Pharmaceuticals Inc. In 2012, Watson acquired Swiss rival Actavis Group and adopted that name. It also absorbed Warner Chilcott PLC and Forest Laboratories Inc. in multibillion-dollar deals.

Mr. Saunders was CEO of Forest Labs, and became CEO of Actavis after that deal. Shortly after, Allergan's predecessor was put into play when Valeant Pharmaceuticals International Inc. made an unsolicited offer to buy the California company.

Actavis then stepped in as a white knight and bought Allergan, taking the company's name.

Meanwhile, in July, Allergan agreed to sell its generics business to Israel's Teva Pharmaceutical Industries Ltd. for more than $40 billion.

The companies expect it will take seven to nine months for the deal to close, sometime after Allergan finishes the Teva deal early next year, the people said.

After the deal closes, the combined company is expected to evaluate splitting into two businesses, one focused on patent-protected products and the other on drugs that have lost their patent protection or are close to losing it.

Write to Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com and Dana Mattioli at dana.mattioli@wsj.com

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(END) Dow Jones Newswires

November 22, 2015 20:25 ET (01:25 GMT)

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