US drugmaker Pfizer Inc is working on its next move in a potential $100 billion battle for Britain’s AstraZeneca Plc after having two bids rejected, as deal-making grips the healthcare industry.
Pfizer yesterday said it made a £58.8 billion bid approach to AstraZeneca in January and had contacted its British rival again on April 26 seeking further discussions about a takeover.
Buying AstraZeneca would boost Pfizer’s pipeline of cancer drugs and create significant cost and tax savings.
AstraZeneca shares jumped 17 per cent on news of the latest approach, which would be the biggest-ever foreign acquisition of a British firm and one of the largest-ever pharmaceutical deals. Pfizer rose 1.5 per cent in premarket US trading.
The renewed approach comes amid a wave of mergers and acquisitions in the sector, pushing the value of deals to $153 billion so far this year, as the industry restructures in the face of healthcare spending cuts and cheap generic competition.
“Society wants products faster, they want more products and they want value,” Pfizer chief executive Ian Read told reporters. “Industry is responding to society’s request for increased efficiencies and productivity.”
Read said AstraZeneca had declined to engage in talks and the US group was now considering its options, but he remained convinced that combining the two companies made strategic sense and would benefit AstraZeneca investors.
AstraZeneca said Pfizer’s suggested offer undervalued the company “very significantly”, adding that Pfizer wanted to pay 70 per cent in shares and only 30 per cent in cash.
AstraZeneca urged its shareholders to take no action and said it remained confident of its independent strategy.
Pfizer’s original proposal, made to the board of AstraZeneca on January 5, would have valued AstraZeneca shares at £46.61 each – a premium of around 30 per cent at the time.
AstraZeneca said the proposal comprised £13.98 in cash and 1.758 Pfizer shares for each AstraZeneca share. “My guess is it will go for somewhere between £50 and £55 [a share],” said Dan Mahony, a fund manager at Polar Capital, who raised his stake in AstraZeneca in February last year.
“I doubt Pfizer will want to go completely hostile.” Shares in the British group shot up to £47.81 by 1240 BST yesterday, after touching an all-time high of 47.92 – their biggest ever daily gain.
Industry analysts said Pfizer was likely to have to offer more than in January due to a run-up in AstraZeneca shares since then, so the value of any new offer could be above $100 billion. Under British takeover rules, Pfizer has until May 26 to announce a firm intention to make an offer or back away.
Pfizer’s declaration turns up the heat under AstraZeneca chief executive Pascal Soriot, who has been in the job since October 2012 and who made clear last week he saw an independent future for the group, flagging spin-offs of two non-core units as one option to create more value.
Soriot has been credited with reviving AstraZeneca’s previously thin pipeline of new drugs, which is badly needed to offset a wave of patent expiries on older drugs, and shares in the group have now risen more than 60 per cent under his tenure.
However, his overhaul – including an ambitious plan to move the company’s research and corporate headquarters to Cambridge, England – is still a work in progress and he has also come under fire from some shareholders over executive pay.
Buying AstraZeneca would give Pfizer a number of promising – though still risky – experimental cancer medicines known as immunotherapies that boost the body’s immune system to fight tumours.
It could also generate significant cost savings for the US group.
Acquiring a foreign company also makes sense for Pfizer as it has tens of billions of dollars accumulated through foreign subsidiaries, which if repatriated would be heavily taxed.
Pfizer has a long track record of making major acquisitions. The $68 billion purchase of Wyeth in 2009 was its last major deal after earlier acquisitions of Pharmacia and Warner Lambert.