Under the terms of the deal, Pfizer will buy Allergan for $363.63 per share. Allergan stock is down 2.54% to $304.88 in morning trading.
TheStreet's Jim Cramer commented on the deal's price on CNBC's Squawk on the Street this morning, noting, "I do think when you put the two together, if you take a longer-term view you can get to where they want to go. But, longer-term view is not something this market likes."
He added that Allergan might have reached $340 per share with CEO Brent Saunders alone, and the companies need to justify the acquisition to shareholders.
"If you're an Allergan shareholder, you're trying to figure out 'Why don't I just go and buy something else? Why don't I just go and buy Celgene (CELG)?'" Cramer said.
For Pfizer, its stock had flatlined because people felt a big patent cliff, which will no longer be the case if this deal is completed, Cramer said.
Additionally, Cramer noted that Pfizer CEO Ian Read should be proud of his pipeline, which is probably why Saunders decided to merge with the company.
"I do love the Pfizer pipeline, but I think people right now are saying 'I expected better,'" Cramer said.
Even so, Cramer's charitable trust will continue to hold shares of Allergan because of the cash flow, he noted.
Separately, TheStreet Ratings team rates ALLERGAN PLC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate ALLERGAN PLC (AGN) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- AGN's very impressive revenue growth greatly exceeded the industry average of 3.7%. Since the same quarter one year prior, revenues leaped by 90.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- ALLERGAN PLC has improved earnings per share by 46.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ALLERGAN PLC reported poor results of -$8.65 versus -$5.43 in the prior year. This year, the market expects an improvement in earnings ($15.41 versus -$8.65).
- The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that AGN's debt-to-equity ratio is low, the quick ratio, which is currently 0.52, displays a potential problem in covering short-term cash needs.
- Compared to other companies in the Pharmaceuticals industry and the overall market, ALLERGAN PLC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: AGN
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.