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Pfizer offers fresh merger plans to AstraZeneca for $99 billion
Our Bureau, Mumbai | Monday, April 28, 2014, 16:00 Hrs  [IST]

Pfizer Inc., a second largest pharmaceutical company after Novartis with pharmaceutical sales of US$ 48 billion in 2013, has contacted AstraZeneca on April 26, 2014 for second time after January 14, 2014, seeking to renew discussions in order to develop a merger proposal that could be recommended by both companies to their shareholders.

Pfizer has confirmed that it previously submitted a preliminary, non-binding indication of interest to the board of directors of AstraZeneca in January 2014 regarding a possible merger transaction for a combination of cash and shares in the combined entity which represented an indicative value of £46.61 ($76.62) per AstraZeneca share and a substantial premium of approximately 30 per cent, approximately US$ 99 billion, to AstraZeneca’s closing share price of £35.86 on January 3, 2014. After limited high-level discussions, AstraZeneca declined to pursue negotiations. The discussions were discontinued on January 14, 2014 and Pfizer then ceased to consider a possible transaction.

However, with changing market conditions,  Pfizer said, this transaction would bring together highly complementary innovative and established pharmaceutical businesses, enhancing the combined company’s ability to meet patients’ needs. Both AstraZeneca and Pfizer shareholders would be expected to participate in short, medium and long-term value creation through enhanced pipeline development opportunities, premier global operations and the anticipated realisation of operational and financial synergies.

Pfizer believes that a transaction, if proposed and consummated, would offer AstraZeneca shareholders a highly compelling opportunity to realise a significant premium to the undisturbed AstraZeneca share price as of April 17, 2014, which includes a substantial cash payment. AstraZeneca shareholders would become significant shareholders in the combined company and participate in significant value creation opportunities, including benefiting from the potential growth opportunities and operational and financial synergies that the combination of two complementary global pharmaceutical companies would be expected to generate. Pfizer is confident a combination is capable of being consummated. The transaction, if consummated, is expected to result in the combination of the two companies under a new UK-incorporated holding company.

As a global corporation, Pfizer would expect the combined company to have management in both the United States and the United Kingdom, and to maintain head offices in New York and list its shares on the New York Stock Exchange.

Commenting on the possible transaction, Ian Read, chairman and CEO of Pfizer, said “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. 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 possible transaction is expected to be accretive to Pfizer’s adjusted diluted earnings per share in the first full year following the combination. In addition, Pfizer has a track record of realising operational synergies and delivering meaningful value accretion for shareholders in prior transactions of a similar type and scale. Pfizer believes that synergies would be achieved through the combination of the two companies’ operations and that the combination would enable greater capital efficiency and a more efficient tax structure. In particular, the currently contemplated structure under a new U.K.-incorporated holding company would not subject AstraZeneca’s non-US profits to US tax, which would be in the best interests of the combined company’s shareholders.

The completion of a possible transaction is subject to the approval of Pfizer’s shareholders and is expected to be a taxable event to Pfizer’s shareholders.

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