US pharmaceutical giant Pfizer Inc wants to buy AstraZeneca PLC in a deal that could value its smaller British rival at more than US$100 billion, creating a new behemoth on the global pharmaceuticals scene.
Pfizer yesterday confirmed that it made a bid approach to AstraZeneca in January and said it had contacted its British rival again on Saturday last week seeking discussions about a takeover.
AstraZeneca shares jumped 15 percent in early trading.
The takeover, if it happens, would be one of the largest-ever deals in the industry. Pfizer’s renewed approach comes amid a wave of pharmaceutical mergers and acquisitions.
In a statement to the London stock market, Pfizer said AstraZeneca had declined to engage in discussions on both occasions and the US group said it was now considering its options.
Pfizer’s original proposal, made to the board of AstraZeneca on Jan. 5, included a combination of cash and shares and would have valued AstraZeneca’s shares at ￡46.61 each — a premium of around 30 percent at the time.
Pfizer said it was now considering a possible transaction in which AstraZeneca shareholders would again receive a significant premium for their shares.
AstraZeneca shares closed at ￡40.80 on Friday last week, valuing it at ￡51.5 billion (US$86.64 billion) against the indicated Pfizer bid level in January of ￡58.8 billion.
Given that Pfizer is likely to have to offer more this time, due to a rise in AstraZeneca shares since January, the final value of any deal could be considerably above US$100 billion.
An AstraZeneca spokeswoman said the company had no immediate comment on the Pfizer statement, adding that the company would be considering its response.
Buying AstraZeneca would give Pfizer a number of promising — though still risky — experimental cancer medicines known as immunotherapies that boost the immune system to fight tumors and could generate significant cost savings.
Acquiring a foreign company also makes sense for Pfizer, because it has tens of billions of dollars accumulated through foreign subsidiaries, which if repatriated to the US would be heavily taxed.
Pfizer has a long track record of making major acquisitions, with the US$68 billion purchase of Wyeth Pharmaceuticals Inc in 2009 its last major deal, after earlier acquisitions of Pharmacia Corp and Warner Lambert Co.
The drugmaker has been divesting certain operations and mega-mergers have fallen out of fashion in the pharmaceuticals industry following skepticism about how well some of them have worked.
However, Pfizer chief executive officer Ian Read said he was ready to consider large deals that made sense, adding that buying AstraZeneca would “maintain the flexibility for the potential future separation of our businesses.”
The deal could complement both Pfizer’s innovative drug businesses and also its established products business — comprising older and off-patent medicines — which many analysts expect to be eventually spun off.
“We believe that a transaction would further strengthen our ability to generate strong and consistent cash flow, targeted for both investment in our business and return to shareholders, while at the same time offering an efficient operating structure and the anticipated realization of attractive synergies,” Read said.