All Eyes on Pfizer as Shareholders Await the Mega-Deal: Real M&A
2015-05-21 21:35:34.202 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Tara Lachapelle
(Bloomberg) -- Pfizer Inc. built itself into a $212 billion
behemoth by spending more money on acquisitions than any other
drugmaker in the world. Still, Pfizer’s next purchase is what
will really leave its mark as a dealmaker.
The company may be plotting its biggest purchase yet to
solve its biggest gripe: taxes. It pays a higher rate than most
of its rivals, and Chief Executive Officer Ian Read has made it
no secret that he wants to change that. It made a failed run at
AstraZeneca Plc last year in what would have been a $120 billion
tax-inversion deal.
As speculation about a deal mounts again, analysts this
week began picking their top takeover candidates. They centered
on GlaxoSmithKline Plc, AstraZeneca and Shire Plc. And if you
ask Mylan NV, it’s also on the list. The executive chairman was
said to have told shareholders last week that Pfizer could buy
his company after Mylan buys Perrigo Co.
Any one of those deals may enable Pfizer to move its legal
address to a place such as the U.K., where corporations have a
lower tax burden. Some of its rivals have already done this and
it’s led to a greater ability to access their overseas cash
stockpiles and eke out more profits for future investments or
shareholder payouts.
“Subject to price, there are a lot of merits to a deal
like that,” Colin McWey, a fund manager for Heartland Advisors
Inc., said in a phone interview. The Milwaukee-based based firm
owns shares of Pfizer among the $4 billion it oversees.
Right Time
In addition to the tax benefits, a deal would give Pfizer
more lucrative products and a way to cut costs. And now may be
the time to do it before borrowing rates climb and the best
targets get picked off. The pharmaceutical industry has been on
a merger and acquisition spree for more than a year now, so
targets are getting more and more expensive, especially as some
draw bidding wars.
Many transactions were structured as tax-inversion deals,
which have drawn increasing scrutiny from the U.S. Treasury
Department since Pfizer bid for AstraZeneca a year ago. In
September, the Treasury Department announced new rules to clamp
down on inversions. While the changes do reduce some of the
benefits of such transactions, they don’t eliminate those
advantages altogether or make doing them impossible.
Read, the Pfizer CEO, said in October that he saw “no
reason” why the company wouldn’t be able to do an inversion if
it found an attractive enough opportunity.
Joan Campion, a spokeswoman for Pfizer, said the New York-
based company doesn’t comment on speculation. When asked about
M&A and inversion plans on an earnings call last month, Read
stressed that creating shareholder value is what guides his
dealmaking.
Not Done
In February, the company announced a takeover of Hospira
Inc. for $16.8 billion, including net debt. Through that deal,
it gains generic injectable drugs and devices to deliever them,
bolstering its established-products division. That part of
Pfizer, which comprises drugs that have lost or are going off
patent protection, may eventually be spun off.
“We believe that other significant acquisitions are
possible, though more likely to be aimed at” Pfizer’s
innovative-pharma side of the company, Jeffrey Holford, a New
York-based analyst for Jefferies Group, wrote in a report
Thursday. He cited Shire as that type of candidate.
Shire, valued at $52 billion, makes treatments for
neurological disorders such as attention deficit hyperactivity
and rare diseases such as Hunter syndrome. Perrigo, the maker of
over-the-counter medicines that received an unsolicited bid from
Mylan, could also be attractive to Pfizer, Holford wrote. Both
companies’ tax jurisdictions are in Dublin.
Glaxo Argument
Deutsche Bank’s Gregg Gilbert highlighted Glaxo in a report
May 20 that said Pfizer may feel a sense of urgency to boost
shareholder value by leveraging its balance sheet and doing a
“needle-moving” transaction. Brentford, England-based Glaxo
would be the largest of the likely targets at $111 billion. It
would diversify Pfizer’s vaccine and consumer portfolios while
doubling and quadrupling each of those revenue bases,
respectively, Gilbert wrote.
Pfizer could always make another attempt at buying
AstraZeneca. The London-based company’s stock has risen just 2.2
percent since it spurned Pfizer last May, underperforming most
of its competitors.
Any deal may be a precursor to an eventual breakup.
Pfizer’s stock is currently one of the cheapest in its peer
group, which many analysts attribute to its conglomerate
structure. The company has said it may explore a split in which
its established-drugs unit gets spun off or sold.
That means multiple deals may be in Pfizer’s future. Or as
Holford of Jefferies called it, “a rich seam of corporate
optionality.”
For Related News and Information:
Pfizer Would Benefit From Glaxo Takeover, Deutsche Bank Says
Mylan Chairman Said to Consider Perrigo Sweeteners to Make Deal
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
Merger calculator: {MRGC <GO>
--With assistance from Allison Connolly in London.
To contact the reporter on this story:
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman
2015-05-21 21:35:34.202 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Tara Lachapelle
(Bloomberg) -- Pfizer Inc. built itself into a $212 billion
behemoth by spending more money on acquisitions than any other
drugmaker in the world. Still, Pfizer’s next purchase is what
will really leave its mark as a dealmaker.
The company may be plotting its biggest purchase yet to
solve its biggest gripe: taxes. It pays a higher rate than most
of its rivals, and Chief Executive Officer Ian Read has made it
no secret that he wants to change that. It made a failed run at
AstraZeneca Plc last year in what would have been a $120 billion
tax-inversion deal.
As speculation about a deal mounts again, analysts this
week began picking their top takeover candidates. They centered
on GlaxoSmithKline Plc, AstraZeneca and Shire Plc. And if you
ask Mylan NV, it’s also on the list. The executive chairman was
said to have told shareholders last week that Pfizer could buy
his company after Mylan buys Perrigo Co.
Any one of those deals may enable Pfizer to move its legal
address to a place such as the U.K., where corporations have a
lower tax burden. Some of its rivals have already done this and
it’s led to a greater ability to access their overseas cash
stockpiles and eke out more profits for future investments or
shareholder payouts.
“Subject to price, there are a lot of merits to a deal
like that,” Colin McWey, a fund manager for Heartland Advisors
Inc., said in a phone interview. The Milwaukee-based based firm
owns shares of Pfizer among the $4 billion it oversees.
Right Time
In addition to the tax benefits, a deal would give Pfizer
more lucrative products and a way to cut costs. And now may be
the time to do it before borrowing rates climb and the best
targets get picked off. The pharmaceutical industry has been on
a merger and acquisition spree for more than a year now, so
targets are getting more and more expensive, especially as some
draw bidding wars.
Many transactions were structured as tax-inversion deals,
which have drawn increasing scrutiny from the U.S. Treasury
Department since Pfizer bid for AstraZeneca a year ago. In
September, the Treasury Department announced new rules to clamp
down on inversions. While the changes do reduce some of the
benefits of such transactions, they don’t eliminate those
advantages altogether or make doing them impossible.
Read, the Pfizer CEO, said in October that he saw “no
reason” why the company wouldn’t be able to do an inversion if
it found an attractive enough opportunity.
Joan Campion, a spokeswoman for Pfizer, said the New York-
based company doesn’t comment on speculation. When asked about
M&A and inversion plans on an earnings call last month, Read
stressed that creating shareholder value is what guides his
dealmaking.
Not Done
In February, the company announced a takeover of Hospira
Inc. for $16.8 billion, including net debt. Through that deal,
it gains generic injectable drugs and devices to deliever them,
bolstering its established-products division. That part of
Pfizer, which comprises drugs that have lost or are going off
patent protection, may eventually be spun off.
“We believe that other significant acquisitions are
possible, though more likely to be aimed at” Pfizer’s
innovative-pharma side of the company, Jeffrey Holford, a New
York-based analyst for Jefferies Group, wrote in a report
Thursday. He cited Shire as that type of candidate.
Shire, valued at $52 billion, makes treatments for
neurological disorders such as attention deficit hyperactivity
and rare diseases such as Hunter syndrome. Perrigo, the maker of
over-the-counter medicines that received an unsolicited bid from
Mylan, could also be attractive to Pfizer, Holford wrote. Both
companies’ tax jurisdictions are in Dublin.
Glaxo Argument
Deutsche Bank’s Gregg Gilbert highlighted Glaxo in a report
May 20 that said Pfizer may feel a sense of urgency to boost
shareholder value by leveraging its balance sheet and doing a
“needle-moving” transaction. Brentford, England-based Glaxo
would be the largest of the likely targets at $111 billion. It
would diversify Pfizer’s vaccine and consumer portfolios while
doubling and quadrupling each of those revenue bases,
respectively, Gilbert wrote.
Pfizer could always make another attempt at buying
AstraZeneca. The London-based company’s stock has risen just 2.2
percent since it spurned Pfizer last May, underperforming most
of its competitors.
Any deal may be a precursor to an eventual breakup.
Pfizer’s stock is currently one of the cheapest in its peer
group, which many analysts attribute to its conglomerate
structure. The company has said it may explore a split in which
its established-drugs unit gets spun off or sold.
That means multiple deals may be in Pfizer’s future. Or as
Holford of Jefferies called it, “a rich seam of corporate
optionality.”
For Related News and Information:
Pfizer Would Benefit From Glaxo Takeover, Deutsche Bank Says
Mylan Chairman Said to Consider Perrigo Sweeteners to Make Deal
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
Merger calculator: {MRGC <GO>
--With assistance from Allison Connolly in London.
To contact the reporter on this story:
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman