NEW YORK: US drug titan Pfizer said it wants to acquire AstraZeneca in a deal potentially worth $100 billion to fortify its pipeline of new medicines and sharply cut its tax bill.
Pfizer Monday disclosed that it proposed in January a preliminary, non-binding takeover of about $99 billion to AstraZeneca, only to be rejected by the British company. A second effort to revive talks was rebuffed on April 26.
Pfizer’s decision to go public with its interest in AstraZeneca comes as global pharmaceutical giants undertake billions of dollars in deals to cope with lost revenues from patent expirations and the effects of public cuts on health care spending.
Analysts said Pfizer’s move will put pressure on AstraZeneca to engage in talks and could even result in a hostile bid.
Pfizer 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.”
The deal would combine research pipelines in oncology and other key disciplines. Pfizer also cited the potential for huge spending cuts after it achieved billions of dollars in cost-savings with its last major deal, a buyout of Wyeth.
Also crucial, Pfizer executives pointed to considerable tax advantages from the transaction, which, “if consummated, is expected to result in the combination of the two companies under a new UK-incorporated holding company,” Pfizer said in a news release.
“Clearly I believe our tax rate would be lower going forward in the combined company,” said Pfizer chief financial officer Frank D’Amelio.
D’Amelio highlighted a number of tax advantages in Britain, including a tax credit for research and development and more favorable treatment of profits earnings overseas.
“Little or no taxes are paid on profits that are generated overseas and repatriated back to the UK,” D’Amelio said.
Analysts at Jefferies estimated that Pfizer currently has about $30 billion in cash held outside the US.
Read said Pfizer had not yet held discussions with US tax authorities on a potential deal, but that there is no reason to expect a “conflict” with US tax officials.
Pfizer would continue to pay tax bills “the same way we are in the US,” maintain its corporate headquarters in the US and continue to hold a listing on the New York Stock Exchange, Read said.
“I believe it’s my fiduciary responsibility to maximize returns to shareholders and I don’t see that is conflicting with the interests of the US government,” Read said. “A strong global company will continue to invest, will continue to create jobs.”
An effort to buy AstraZeneca follows other mega-mergers undertaken by Pfizer, the biggest US drugmaker by revenue. Prior Pfizer takeovers included Warner-Lambert, Pharmacia and Wyeth.
Yet some analysts had expressed surprise when Pfizer’s move to chase AstraZeneca was chronicled in press reports last week. Pfizer has been reorganizing its assets into three divisions, with an eye towards splitting into three publicly traded entities.
Some analysts read the strategy to be an effort to shrink and avoid further mega-mergers.
Read said an AstraZeneca buyout was “totally consistent” with Pfizer’s strategy and would better position all three divisions of its evolving structure. Two of the three divisions are focused on new products in inflammation, oncology and other fields, while the third is for established products.
AstraZeneca, meanwhile, emphasized that it “remains confident in the ongoing execution of AstraZeneca’s strategy as an independent company and that its successful delivery will create significant value for shareholders.”
Pfizer said it had informally offered £46.61 ($78.40) per AstraZeneca share on January 5 in a cash and stocks offer, which valued the target company at £58.8 billion ($99 billion).
Pfizer said the offer was about a 30 percent premium over AstraZeneca’s closing price January 3.
AstraZeneca said it rejected the Pfizer proposal because it “significantly undervalued” the British company.
AstraZeneca Saturday also rebuffed an appeal from Pfizer to release a joint statement saying the two companies had entered discussions on a possible combination.
“Absent a specific and attractive proposal, it was not appropriate to engage in discussions with Pfizer,” AstraZeneca said.
In mid-morning trade, shares of Pfizer shot up 3.9 percent to $31.95, while shares of AstraZeneca gained 14.4 percent to £46.67 in London.