NEW YORK — Pfizer Inc. is getting closer to breaking up and moving out.

The largest US drug maker is in "preliminary friendly discussions" about combining with Allergan PLC, the companies said in separate statements Thursday. It's possible no deal will be reached, they added. They didn't discuss any financial terms, but a combination would probably be the biggest ever in the drug industry.

Buying Allergan, which is based in Dublin but runs its operations out of New Jersey, would give Pfizer a low-tax legal address abroad and valuable drugs like the Botox antiwrinkle treatment. It would also help New York-based Pfizer meet its goal of adding scale before splitting up into two new companies — one focused on older products at the end of their life cycles, and another, faster-growing business of new brand-name drugs.


The resulting jump in Allergan shares fell far short of the premium some analysts predicted investors would need to agree to a deal, a sign of both potential regulatory hurdles and American political obstacles to such transactions, called tax inversions. The stock gained 6.21 percent to $305.03 in New York. Pfizer would need to pay at least $400 a share to win over Allergan's shareholders and management, Shibani Malhotra, an analyst at Nomura Holdings Inc., said in a note to clients.

The 2016 US presidential race is underway, and leading candidates from both the Democratic and Republican parties are looking to close avenues that allow US companies to escape the reach of tax collectors. Republican hopefuls were attacking inversions in a televised debate Wednesday evening, even as the first reports were breaking about the Pfizer-Allergan talks.

This inversion would be by far the biggest by a US company, after dozens of smaller businesses — including many drug makers — have used deals abroad to exit the US's 35 percent corporate tax rate.


Purchasing Allergan, which had a market value of $113 billion at Wednesday's close, may help Pfizer meet one of the criteria to clear US tax rules — that the foreign target be of ample size. That was one of the reasons Pfizer sought to acquire AstraZeneca PLC last year, before eventually withdrawing its proposal.

Pfizer is at a competitive disadvantage by having its tax domicile in the United States, chief executive Ian Read said at a Thursday morning event hosted by the Wall Street Journal, which first reported the talks on Wednesday evening.

Foreign companies with a lower tax rate can invest more in research, he said.

Ireland offers tax advantages besides its low 12.5 percent corporate tax rate. The country makes it relatively easy to move profits into zero-tax locales like Bermuda and Grand Cayman.

As a result, US companies with big Irish subsidiaries often pay a tax rate in the low single-digits on those units' profits. Ireland is also drafting plans to set just a 6.25 percent rate on profits resulting from patent innovations — a big benefit to drug companies like Pfizer.

While the two companies had not yet confirmed their discussions at the time Read was speaking on Thursday, he did say that Pfizer could do a merger and then split. Pfizer shares declined 1.92 percent to $34.77 in New York.

While Allergan's stock is up about 12 percent this year, its closing price Wednesday of $287.20 is well below its July peak of about $340.