A bitter pill
Is AstraZeneca keen on a deal?
Well, Pfizer’s initial offer of Dhs358.8 billion was rejected by AstraZeneca, which claimed it “significantly undervalued” the firm. They’re thought to be holding out for a bid closer to Dhs.400.5 billion, which would represent around a 30 percent premium on the company’s current share price. This is typically what major pharmaceutical companies go for, including Pfizer’s very own Wyeth, which it bought in 2009.
That’s a lot of moolah, is it worth it?
According to Morgan Stanley’s David Risinger, it’s a deal with almost as many pluses as minuses. That Dhs400.5 billion would buy Pfizer a leading presence in the so-called primary care market, which covers respiratory ailments, diabetes and oncology, not to mention a foothold in emerging markets such as Africa, which is currently blossoming.
And the downside?
Pfizer’s been trying to downsize for years, knocking millions off its R&D budget last year, while exiting a number of markets, shutting departments and laying off staff. It only had one drug approved by the Federal Drug Authority in 2013, and hasn’t managed to push a blockbuster treatment out of the door in a number of years. The acquisition of the more nimble AstraZeneca could help buck that trend, but there are fears that Pfizer’s business model could crush AstraZeneca, sucking the value from the company.
Do investors feel the same?
That’s what Pfizer’s trying to feel out. After being rebuffed by AstraZeneca’s board, it’s put out a public statement intended to woo the shareholders, claiming its purchase is “a highly compelling opportunity to realise a significant premium” and offers a “substantial cash payment”. Basically, “agitate the board to sell and we’ll chuck lurid amounts of money at you”.
So what’s next?
Pfizer will hope to spark enough unrest to bring AstraZeneca to the negotiating table. If that fails, they’ll likely go hostile and approach the shareholders with their bid directly. However, that path’s costly and could fracture the company before Pfizer gets its hands on it. Whatever happens, the road to acquisition is sure to be long and bumpy.
Sales £15.3 billion £30.7 billion
Profits £1.9 billion £9.3 billion
Employs 51,000 people 78,000 people
R&D budget £2.8 billion /year £3.9 billion /year