Pfizer Inc. and Allergan PLC said Monday that they would merge, a so-called inversion deal that would create the world's biggest drug maker by sales.

The takeover would be the largest so-called inversion ever, moving one of the top names in corporate America to a foreign country. 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.

The deal is structured as a reverse merger, with Dublin-based Allergan buying New York-based Pfizer, which will help secure a lower tax rate.

The Wall Street Journal had reported the companies were on the cusp of a deal, with terms having been hammered out, on Sunday.

Pfizer Chief Executive Ian Read will lead the combined company with Allergan CEO Brent Saunders serving as operating chief.

The combination will create a pharmaceutical behemoth, with top-selling products including Pfizer's Prevnar pneumonia vaccine and Allergan's anti-wrinkle treatment Botox and 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 brings 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.

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

Allergan is the result of a number of mergers in quick succession. It started off as a 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.

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

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 23, 2015 07:35 ET (12:35 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.
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