The Sunday Times reported yesterday that pharma giant Pfizer Inc. (NYSE:PFE) had recently made a $101 billion bid for smaller rival AstraZeneca plc (ADR) (NYSE:AZN) (LON:AZN). According to senior investment bankers with knowledge of the offer, AztraZeneca management rejected the offer and it is not believed the companies are still actively negotiating.
Analysts say that AstraZeneca’s cancer pipeline — especially new immunotherapies that boost the body’s immune system to fight tumors — was the big draw for Pfizer Inc. (NYSE:PFE), but that acquiring its smaller rival would also result in significant cost savings.
Pfizer – AztraZeneca deal offered 25% premium
Assuming the $101 billion offer is accurate, that would mean Pfizer Inc. (NYSE:PFE)’s offer was at an almost 25% premium to AstraZeneca plc (ADR) (NYSE:AZN) (LON:AZN)’s current price of $63. Analysts have commented they believe the deal could be funded by cash, low interest rate debt and/or shares, and would boost Pfizer’s earnings immediately. They also noted that a foreign acquisition makes sense given U.S.-based Pfizer has tens of billions of dollars in profits from foreign subsidiaries, which would be heavily taxed if repatriated.
Pfizer Inc. (NYSE:PFE) has made a number of big deals in the past with mixed results. The $68 billion acquisition of Wyeth in 2009 was the company’s last major deal, but PFE also brought large pharma companies Pharmacia and Warner Lambert into the fold a few years earlier.
Citi Research analyst Andrew Baum published an investor’s note saying he thought the report was “very likely genuine”. He also said Pfizer could well come back with another offer or take other steps, given AstraZeneca’s pipeline of promising cancer drugs and therapies for autoimmune diseases as well as the opportunity to significantly reduce costs..
“We anticipate Pfizer to push aggressively ahead with a second approach,” Baum said in his note on Monday.
Other bidders are possible
It’s also possible that Pfizer Inc. (NYSE:PFE)‘s bid on AstraZeneca might bring out other bidders. For example, Amgen, Inc. (NASDAQ:AMGN) already has a partnership with AstraZeneca to develop treatments for autoimmune diseases such as psoriasis and severe asthma.
AstraZeneca plc (ADR) (NYSE:AZN) shares were up over $4 (6.5%) in pre-market trading Monday morning.