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Pharma M&A Bubble Alive And Well After Pfizer Confirms AstraZeneca Bid; AZN Demands More

Tyler Durden's picture




 

While the news that Pfizer has been sniffing around AstraZeneca has been around for a while, it is the confirmation this morning from Pfizer that it is considering a cash and stock offer for AZN that has been the catalyst to push futures off their early trading levels, on yet another instance of the Pharma M&A bubble which we have been chronicling here in recent weeks. Needless to say, a Pfizer-AstraZeneca combination valued at roughly $100 billion would create the largest healthcare company by revenue and likely serve as the pharma bubble "peak "indicator very much like the Blackstone IPO marked the financial top in 2007.

According to the Bloomberg bulletin summary, Pfizer says AstraZeneca shareholders would receive “a significant premium” for their AstraZeneca shares, to be paid in a combination of cash and shares in the combined entity, according to statement.

  • Pfizer “confident a combination is capable of being consummated"; two companies would be combined under a new U.K.-incorporated holding company
  • Pfizer made offer on Jan. 5 for cash and shares worth GBP46.61 per AstraZeneca share; 30% premium to AstraZeneca’s closing share price of GBP35.86 on Jan.3
  • Firm offer conditional on due diligence review, unanimous recommendation by Astra board
  • AstraZeneca spokesman said on the phone the company is in process of reviewing Pfizer statement
  • Says no immediate comment on Pfizer statement.

More from the WSJ:

Pfizer said it had originally approached AstraZeneca in January about a possible merger of the two companies and they held "high-level" talks, but these were discontinued on Jan. 14. Pfizer said it made its second approach on April 26.

 

Pfizer's previous proposal made to the board of AstraZeneca on Jan. 5 included a combination of cash and shares in the combined entity, which represented an indicative value of £46.61 ($76.62) per AstraZeneca share and a premium of 30% to AstraZeneca's closing share price of £35.86 on Jan. 3.

 

The indicative price would value AstraZeneca at about £58.73 billion, or $98.68 billion.

 

Pfizer said that if the deal goes ahead the two companies would be combined under a new U.K.-incorporated holding company, with management in both the U.S. and U.K. It would maintain its head office in New York and list its shares on the New York Stock Exchange.

 

"We have great respect for AstraZeneca and its proud heritage as an innovation-driven biopharmaceutical business with a rich science-based foundation in both the United Kingdom and Sweden," said Pfizer Chief Executive Ian Reed. "In addition, the United Kingdom has created attractive incentives for companies to manufacture products and maintain and protect intellectual property, and we have seen that capital and jobs have followed these types of incentives."

 

"The combination of Pfizer and AstraZeneca could further enhance the ability to create value for shareholders of both companies and bring an expanded portfolio of important treatments to patients," Mr. Reed added.

Still, for now at least AstraZeneca which surged on the news earlier, appears to no have great repsect for the offer, and in a statement released moments ago said that it concluded it was not appropriate to engage in talks, as the proposal significantly undervalues the company, adding it is committed to its strategy announced in March 2013 and urges shareholders not to take action. In other words, if Pfizer could please raise its offer a bit to quite a bit, that would be great.

 

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Mon, 04/28/2014 - 06:06 | 4703230 Fuh Querada
Fuh Querada's picture

Preparing for :

-bankruptcy of Medicare and Medicaid

-bankruptcy of 0zer0dontcare insurees

-full payment of medicines by the 0.01% only

-introduction of the Scheiss dollar (acc to Jim Willie) 

-cost pressures by health system payers in the EU

-vendor financing for the PIIGS

Mon, 04/28/2014 - 06:33 | 4703275 negative rates
negative rates's picture

Quite a bit bitches!* 

Mon, 04/28/2014 - 08:24 | 4703430 Buckaroo Banzai
Buckaroo Banzai's picture

"Needless to say, a Pfizer-AstraZeneca combination valued at roughly $100 billion would create the largest healthcare company by revenue"

Calling these dope peddlers "healthcare" is getting to be a tiresome abuse of the language.

If we can't call them dope pushers, at least call them the "sickcare" industry.

Mon, 04/28/2014 - 11:31 | 4704057 Chuck Knoblauch
Chuck Knoblauch's picture

I'm proud to say that I don't consume any of their shit.

Mon, 04/28/2014 - 06:34 | 4703277 Racer
Racer's picture

When do we get to the stage of 'monopoly'

Hmmm, oh yeah, we are there already with the too big to jails

Mon, 04/28/2014 - 10:25 | 4703834 Loucleve
Loucleve's picture

MISSD THE MOST IMPORTANT PART:

In addition to using offshore cash, buying AstraZeneca would be tax-efficient since Pfizer could re-domicile to Britain and enjoy lower tax rates, thanks to attractive incentives to companies that manufacture and hold patents in the country.

Strange how a company can do that, but if I as an individual wish to do so, the US govt STILL comes after me for taxes.

unless I renounce my citizenship.  which i believe entails some form of penalty/tax.

maybe corps arent people after all

Mon, 04/28/2014 - 11:00 | 4703972 Cthonic
Cthonic's picture

Re renounciation: they actually started closing the gates back in the nineties.  And now, since 2008, the irs 'imposes a mark-to-market regime, which generally means that all property of a covered expatriate is deemed sold for its fair market value on the day before the expatriation date.  Any gain arising from the deemed sale is taken into account for the tax year of the deemed sale notwithstanding any other provisions of the code', along with a stiff 30% withholding tax on deferred compensation.  Sovereign man's invective aside, leaving ain't free.

Mon, 04/28/2014 - 11:18 | 4704025 Loucleve
Loucleve's picture

how is cost basis calculated?

they probably already offshored manufacturing, so most assets are intellectual property. 

Mon, 04/28/2014 - 11:18 | 4704027 Chuck Knoblauch
Chuck Knoblauch's picture

Don't forget about the indirect US FTC.

I doubt Pfizer is in an OFL status.

 

Mon, 04/28/2014 - 11:02 | 4703977 Cthonic
Cthonic's picture

And you are absolutely right about PFE doing this solely for financial engineering purposes.  There's a running joke in the industry~ if you haven't been fired by Pfizer at least once, you haven't been around very long. AZN employees take note.

Mon, 04/28/2014 - 11:14 | 4704018 Chuck Knoblauch
Chuck Knoblauch's picture

The murky depths of subpart f.

You need to incorporate yourself into a wholly owned foreign subsidiary.

Claim APB 23 status.

You're set.

Mon, 04/28/2014 - 11:02 | 4703981 Chuck Knoblauch
Chuck Knoblauch's picture

FIRE THE GROSSLY OVERPAID PHARMA REPS

Keep the young Miss America types with the firm titties.

Fire the MILF's.

Mon, 04/28/2014 - 13:05 | 4704412 RichardParker
RichardParker's picture

Revenue at both companies down 6% from a yr ago. Deal is driven by alleged cost savings and tax advantages, aging pipelines in borh of them, not to mention Obamacare.  What's not to like about this deal?

 

I wonder how many layoffs will result from this?

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