• Offer will be structured with enough stock to be an inversion
  • Allergan wants more than $350 per share, no price yet decided

Pfizer Inc. and Allergan Plc are making progress on the year’s biggest acquisition and are working toward agreeing on a deal as early as next month, people with knowledge of the matter said.

The drugmakers are keen on a friendly deal and hope to agree on the terms of the takeover, including who will lead the combined company, by Thanksgiving, the people said, asking not to be identified as the discussions are private. While Pfizer is lining up banks to finance a deal, any offer would contain enough shares to allow the company to shift its base to Allergan’s lower-taxed Irish domicile, the people said.

So far Pfizer has not made a specific price offer to Allergan, whose shares traded up another $4.09 on Friday to close at $308.47. Allergan is expecting to get more than $350 a share from Pfizer, though talks have not yet gotten into specifics, one person close to the target company said. No final details have been agreed, and the deal may still fall apart, the people said.

Pfizer also sees the deal as a way to accelerate the break up of the company and may pursue a sale of its generics business as part of the agreement, said the people. Doing so would follow Allergan’s lead, after the company agreed in July to sell its generic-drug business to Israeli rival Teva Pharmaceuticals Industries Ltd. for about $40.5 billion.

Investors and analysts have expected Pfizer would try to break up if it were able to complete an inversion deal that lowered its tax rate.

A spokeswoman for Pfizer declined to comment beyond the company’s statement from Thursday. A spokesman for Allergan declined to comment.

The largest U.S. drugmaker said Thursday it’s in “preliminary friendly discussions” about combining with Allergan, which had a market value of $113 billion the day before the talks were announced. Buying Allergan would give Pfizer a low-tax legal address abroad and valuable drugs like the Botox anti-wrinkle treatment.

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