Transfer Pricing Associates

Pfizer Eager to Takeover AstraZeneca

post Thursday May 1, 2014

Tags: astrazeneca, pfizer, pharmaceutical

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In January 2014 U.S. drugmaker Pfizer Inc. proposed a takeover to AstraZeneca for nearly $100 billion. However, AstraZeneca refused that offer. Last Saturday, Pfizer Inc. approached their British rival again. AstraZeneca still requests a higher bid before they allow the takeover. If Pfizer actually manages to take over AstraZeneca, it will be the biggest foreign acquisition of a British company in history and one of the largest deals in the pharmaceutical industry.

The potential deal held the entire healthcare industry in its grip. Investors of both parties are in favor of the takeover. The shares of AstraZeneca on the New York Stock Exchange increased by 11.7 percent after the news was announced. The shares of Pfizer increased by 3.8 percent on Monday afternoon on the NYSE.

The reason for the refusal of the bid is that AstraZeneca thinks that Pfizer’s offer undervalues the company. Furthermore, Pfizer was willing to pay 70 percent in shares and only 30 percent in cash. AstraZeneca is very confident that the bid of Pfizer will rise and urged its shareholders to hold faith in the strategy of the British company.

Pfizer is eager to buy AstraZeneca, because the acquisition would boost their pipeline of cancer drugs and save a lot of money regarding costs and tax. Buying AstraZeneca would also give Pfizer a number of promising and risky experimental cancer medicines known as immunotherapies that boost the body’s immune system to fight tumors. The British rules state that Pfizer has until May 26 to announce if they either want to offer another bid or withdraw.

The enormous bid of Pfizer comes at an inconvenient moment for the Chief Executive of AstraZeneca Pascal Soriot, who claims to want an independent future for his company. Even though he is responsible for reviving AstraZeneca’s thin pipeline of new drugs and since his appointment as CEO the shares have risen with 60 percent, there is still work in progress and his shareholders are complaining about the executive pay.

Pfizer envisions a new UK-incorporated holding company with a head office and stock market listing in New York. However, there are some negative side effects of the suggested deal. Britain is worried about job opportunities in the drug industry, denoted by the government as a key industry. AstraZeneca had to fire thousands of staff members due to patents losses on important medicines and Pfizer had to shut a research facility in Southern England.

Even though there are several disadvantages about the desired deal of Pfizer, the takeover could also be a huge change in the healthcare industry. The CEO of Pfizer said that large deals could make sense and buying AstraZeneca would ‘’maintain the flexibility for the potential future separation of our businesses.’’

Source: Reuters

Image courtesy of David Castillo  / 

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