Drug giants Pfizer, AstraZeneca in $100bn merger tussle (Update)

by Ben Perry

US drugs giant Pfizer wants a blockbuster merger with British rival AstraZeneca that will fuel cancer research, revealing on Monday that an informal approach worth almost $100 billion had been rejected.

Pfizer chairman and chief executive Ian Read said that a tie-up between two of the world's biggest pharmaceutical groups would "help to fight some of the world's most feared diseases, such as cancer".

It would also benefit the shareholders of both companies, he said.

AstraZeneca's share price surged by about 15 percent in response to Read's statement, bringing the company's market value to slightly above January's informal offer price of $99 billion.

AstraZeneca had yet to respond to Pfizer's statement, which comes as the global pharmaceutical sector is undergoing a huge shake-up to face the challenges of expiring patents for key brands and deep cuts to government healthcare spending worldwide.

On a broader front, big companies are showing renewed interest in takeover opportunities amid a new-found appetite for risk, driven by strong cash positions, and cheap money since the financial crisis

Reports of a potential tie-up between the two drugs groups had first emerged one week ago.

In a statement issued to the London Stock Exchange, Pfizer said "it previously submitted a preliminary, non-binding indication of interest to the board of directors of AstraZeneca in January 2014 regarding a possible merger transaction".

It added: "After limited high-level discussions, AstraZeneca declined to pursue negotiations." Pfizer however stressed "its continuing interest in a possible merger transaction".

Pfizer to turn 'hostile'

Joshua Raymond, chief market strategist at City Index trading group, said Pfizer's statement indicated that the company was no longer interested in a friendly merger deal.

"Make no mistake, the confirmation today of Pfizer's interest is a declaration of its intention to now pursue a hostile merger.

"With AstraZeneca rebuking their attempts to negotiate, Pfizer has tried to create a buzz within AstraZeneca's leading shareholders to get them to force the issue with the current board.

"The board of AstraZeneca remains under pressure after falling sales and a failure to gain momentum for ... turnaround plans," Raymond said in a note to clients.

Pfizer said it had informally offered £46.61 ($78.4, 56.59 euros) per AstraZeneca share on January 5 in a cash and stocks offer, which valued the target company at £58.8 billion ($99 billion).

The US company said it had contacted AstraZeneca on Saturday "seeking to renew discussions" and was "considering its options" after AstraZeneca once more refused to take up the interest.

Read said on Monday that "patients all over the globe would benefit" from a merger, "in the form of potential new therapies that help to fight some of the world's most feared diseases, such as cancer".

He said: "The combination of Pfizer and AstraZeneca could further enhance the ability to create value for shareholders of both companies."

Rush of tie-ups

Speaking last Thursday, AstraZenenca chief executive Pascal Soriot said his company was on the look out for deals, while cautioning about major merger agreements.

Soriot, who said large acquisitions can be "very disruptive", spoke to reporters following publication of AstraZeneca's latest earnings update and after drugmakers Novartis and GlaxoSmithKline unveiled multi-billion-dollar deals also involving US group Eli Lilly.

The string of deals by the three giant healthcare groups will see Novartis sharpen its focus on the high-grossing cancer sector, GSK boost its share in vaccines and Eli Lilly strengthen its animal health unit.

Also last week, Valeant Pharmaceuticals offered to acquire Botox-maker Allergan for more than $45 billion.

Raymond said a merger would produce also a massive tax benefit for Pfizer.

"They are sitting on a burgeoning cash pile of multiple billions outside of the US, and would face a hefty tax bill to repatriate this cash," he noted.

AstraZeneca is looking to push ahead with new treatments for cancer, respiratory disease and diabetes after announcing a plunge in profits for the first quarter, hit by generic competition following the loss of exclusivity for some of its key drugs.

AstraZeneca is shedding also around 5,000 jobs under a three-year cost-cutting programme due to end in 2016.

add to favorites email to friend print save as pdf

Related Stories

Eli Lilly to buy part of Novartis for $5.4 bn

Apr 22, 2014

US pharmaceutical giant Eli Lilly said Tuesday it has reached an agreement to acquire the animal health division of Novartis of Switzerland for $5.4 billion (3.9 billion euros).

AstraZeneca pays $4.1 billion for diabetes buyout (Update)

Dec 19, 2013

Anglo-Swedish drugmaker AstraZeneca PLC will buy out Bristol-Myers Squibb Co.'s stake in their partnership to develop and sell diabetes drugs in a deal worth $4.1 billion—seizing an opportunity to serve the projected explosion ...

Recommended for you

FDA OKs Cubist antibiotic for serious infections

10 hours ago

The Food and Drug Administration has approved a new medicine to fight complex infections in the abdomen and urinary tract, the fourth antibiotic the agency has approved since May.

Xtoro approved for swimmer's ear

Dec 18, 2014

(HealthDay)—Xtoro (finafloxacin otic suspension) eardrops have been approved by the U.S. Food and Drug Administration to treat swimmer's ear, clinically known as acute otitis externa.

Drug interaction identified for ondansetron, tramadol

Dec 18, 2014

(HealthDay)—In the early postoperative period, ondansetron is associated with increased requirements for tramadol consumption, according to a review and meta-analysis published online Dec. 10 in Anaesthesia.

New system targets germs in donated blood plasma

Dec 17, 2014

(HealthDay)—A new system designed to eliminate germs in donated blood plasma and reduce the risk of transmitting a plasma-borne infection has been approved by the U.S. Food and Drug Administration.

User comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.