Pfizer’s AstraZeneca pursuit knocked by Shire deal collapse
The chances of Pfizer reviving its pursuit of AstraZeneca have been greatly diminished after the collapse of AbbVie’s £32bn acquisition of Shire, according to several people close to the situation.
Pfizer, the biggest US drugmaker, would be free under UK Takeover Panel rules to make a new approach for AstraZeneca from next month when a mandatory cooling-off period ends following its failed £69.4bn bid in May.
However, such a move has become much less likely after AbbVie, another US drugmaker, backed away from its deal with UK-listed Shire because of a White House clampdown on foreign takeovers that allow American companies to cut their US tax bills, these people said.
Pfizer’s thinking could change after the US midterm elections next month if President Barack Obama – who has led the campaign against so-called tax inversions – loses support in Congress.
But AbbVie’s U-turn on Shire has highlighted the increased obstacles facing inversion deals. The Chicago-based company said the new rules had “fundamentally changed” the economics of its proposed acquisition.
Pfizer and AbbVie are among more than a dozen American companies that have sought deals this year to shift their tax domicile overseas to escape the 35 per cent US corporate tax rate – the highest in the developed world. Pfizer had hoped to cut its average tax rate from 27 per cent to 21 per cent by buying AstraZeneca and moving to the UK. The Treasury clampdown has made it harder for companies to use inversions to shield offshore cash from US taxes.
After rejecting Pfizer’s £55-a-share offer in May, AstraZeneca said £58.50 was the minimum level at which it would have considered entering negotiations. Analysts said the Treasury measures had made it tougher for Pfizer to reach such a price.
These analysts said that the chances of a Pfizer approach for Actavis, the Dublin-based generic and speciality drugmaker often touted as an alternative potential target for the US company, had also been reduced.
If an inversion is ruled out, Ian Read, Pfizer’s chief executive, will be under pressure to come up with other ways to boost performance after a period of sluggish growth and lacklustre drug development.
AstraZeneca faced criticism from some shareholders for rebuffing Pfizer. But people familiar with AstraZeneca’s thinking said the AbbVie-Shire collapse reinforced the company’s concern over the political risks involved in inversions.
They pointed out the disruption that would have been caused to its business – particularly its research and development pipeline – if it had agreed a deal with Pfizer only for it subsequently to collapse.
Shares in AstraZeneca, which peaked at £48.23 after Pfizer’s approach, have fallen back to £41.96. But Pascal Soriot, chief executive, has repeatedly voiced confidence in the company’s standalone prospects with several promising experimental drugs in development.
Pfizer and AstraZeneca declined to comment.