AbbVie has been looking for ways to reinvigorate its pipeline of experimental drugs as Humira, the best-selling medicine in the world, faces competition from cheaper biosimilars.
AbbVie has repeatedly hiked Humira's monthly list price, from $1,524 in 2009 to $5,174 this year, to squeeze extra billions from it.
Allergan shareholders will receive 0.8660 AbbVie shares and $120.30 in cash for each share held, for a total consideration of $188.24 per Allergan share, a premium of 45 per cent to Allergan's Monday close.
The combination will create a company with annual revenue of about US$48 billion operating in 175 countries with an industry-leading pipeline of drugs in development, said Brent Saunders, Allergan's chief executive officer.
Humira, which treats rheumatoid arthritis, psoriasis and colitis, saw sales slip in the first quarter due to growing biosimilar competition overseas.
The deal was a better-than-expected outcome for Allergan as investors and analysts were expecting a split, Cantor Fitzgerald analyst Louise Chen wrote in a note, adding that it is unlikely that anyone else will step in and bid for Allergan at this point.
100 children moved back to controversial Clint, Texas, border facility
Ms Stauffer said children were waiting too long in the border facilities, which are "not created to care for children". She said both the mother and premature baby were caked in dirt.
Industry analysts had been anticipating a move by AbbVie.
Put another way: "AbbVie has near-term growth but faces a cliff, or more like a canyon, problem with the loss of Humira to [generic] biosimilars in the US beginning mid-2023 while Allergan... has struggled to generate growth but doesn't face any key near-term exclusivity loss", wrote Raymond James analyst Elliot Wilbur in a research note. He believes AbbVie also is taking advantage of Allergan's low stock price. AbbVie's main areas of expertise are immunology, oncology, virology and neuroscience.
AbbVie shares were down 14% at $67.54, while Allergan's stock was up 27.60% at $165.13 in morning trading.
Regulators and Allergan shareholders still have to approve the deal.
In early March, Swiss drugmaker Roche won a bidding war for Philadelphia-based gene therapy company Spark Therapeutics. Including debt, the deal values Allergan at $83 billion.
But its $4.8 billion deal, expected to close at the end of this month, has been held up repeatedly by information requests from the U.S. Federal Trade Commission and its United Kingdom counterpart. Bristol-Myers recently said the deal might not close until next year.