Image copyright Reuters

US drugs giant Pfizer has sealed a deal to buy Botox-maker Allergan for $160bn (£106bn) in what is the biggest pharmaceuticals deal in history.

The takeover could allow Pfizer to escape relatively high US corporate tax rates by moving its headquarters to Allergan's Dublin base.

The merged company will be the world's biggest drug maker by sales.

Allergan shareholders will receive 11.3 shares in the new company for each of their Allergan shares.

Pfizer shareholders will receive one share for each of their shares in that company.

Shares in Pfizer closed down 2.7% in New York at $31.32, while Allergan fell 3.4% to $301.70.

Hilliary Clinton, the likely Democratic presidential candidate, said inversion deals like Pfizer's would "leave US taxpayers holding the bag" and called on Washington to ensure that the biggest companies "pay their fair share".

Image copyright Getty Images Image caption Hillary Clinton has criticised tax inversion deals

Senator Bernie Sanders, another Democratic hopeful, said the deal would be a disaster for consumers and allow another major US company to hide its profits overseas.

Republican presidential candidate Donald Trump described Pfizer's departure from the US as "disgusting", adding: "Our politicians should be ashamed."

Savings

The merged business will be called Pfizer Plc. The companies said they expected the deal to be completed in the second half of 2016, subject to regulatory approval in the US and Europe.

Pfizer said it expected the merger to result in savings of $2bn in the first three years.

Pfizer boss Ian Read will be chief executive and chairman of the merged company, with Allergan boss Brent Saunders becoming president and chief operating officer.

"The proposed combination of Pfizer and Allergan will create a leading global pharmaceutical company with the strength to research, discover and deliver more medicines and more therapies to more people around the world," said Mr Read.

Critically, the terms of the deal propose that the merged company will maintain Allergan's Irish domicile. This means the profits of the new company would be subject to corporation tax of 12.5% - much lower than the 35% Pfizer pays in the US.

'Next chapter'

Last year, Pfizer made an offer to buy AstraZeneca in a move that analysts said was designed to reduce Pfizer's tax bill. The UK drugs group rejected the bid, arguing it undervalued the company.

Explaining Allergan's motives, Mr Saunders said: "This bold action is the next chapter in the successful transformation of Allergan, allowing us to operate with greater resources at a much bigger scale."

The deal is the latest in a series of mergers and acquisitions in the sector, as pharmaceuticals companies struggle to cope with patents on a number of major drugs expiring.

Ketan Patel, at EdenTree Investment Management, said: "The pharmaceutical sector, which has had over $220bn of deals in the first half of 2015 alone, will be buoyed further by the proposed purchase of Allergan by Pfizer, the largest pharma deal ever at $160 billion, surpassing the $116 billion Pfizer paid for Warner Lambert in 2000. The deal is also the biggest [tax] inversion deal."