Pfizer Enters Takeover Discussions With AstraZeneca, Sources Say
Talks Resume After Pfizer Sweetens Terms of Earlier Takeover Offer for British Rival
Pfizer Inc. PFE -0.42% and AstraZeneca AZN.LN +0.27% PLC have resumed talks about a trans-Atlantic merger of the two drug giants, after Pfizer sweetened the terms of an earlier takeover offer for its British rival, according to people familiar with the matter.
The terms of the informal offer from New York-based Pfizer couldn't be learned. Its earlier approach, which was rejected, valued AstraZeneca at nearly $100 billion.
The renewed discussions suggest that the two sides might be getting closer to striking a friendly deal, though there is no guarantee they will go anywhere.
Pfizer made an offer to buy AstraZeneca in January that valued the British company at £46.61 a share. After the approach was disclosed this week, AstraZeneca said it "significantly undervalued" the company.
A box of Arthrotec 50 tablets, produced by Pfizer, and a box of EMLA cream, produced by AstraZeneca, are seen in this arranged photograph taken in London in April. Bloomberg A merger would create the world's biggest pharmaceutical company, selling drugs for most major conditions, including cancer, diabetes and heart disease. It would be one of the industry's biggest deals since Pfizer bought Warner-Lambert for $90 billion in 2000.
It could also help the companies deal with the billions of dollars in sales they are losing as blockbusters like cholesterol fighter Lipitor face competition from generic rivals. Each company had a sales drop of 6% last year, Pfizer's to $51.6 billion and AstraZeneca's to $25.7 billion.
Pfizer Chief Executive Ian Read has said the primary driver behind the proposed deal is a desire to build the strongest lineup of products across each of the company's businesses, including drugs that have lost patent protection but sell well in fast-growing emerging markets.
It would also link Pfizer's targeted cancer therapies with AstraZeneca's drug candidates that aim to use the body's immune system to fight the disease. Researchers believe different kinds of drugs need to be combined to improve cancer treatment.
A deal might also strengthen each of Pfizer's three business units enough that the company would divide into separate companies, an option executives have said they are exploring.
Pfizer executives have indicated they would use some of the company's cash reserves earned and kept overseas to pay for a deal. Pfizer had $49 billion in cash and equivalents outside the U.S. at the end of last year.
Pfizer executives have also said they would domicile the combined company in the U.K. to lower its tax rate. And they have also said they would expect to cut costs.
Pfizer first approached London-based AstraZeneca last November, and the companies met in New York in January, AstraZeneca said Monday. At that meeting, Pfizer proposed a deal consisting of 70% Pfizer stock and 30% cash, according to AstraZeneca.
AstraZeneca said it rejected the offer on Jan. 12, because its board was concerned about the large proportion of Pfizer stock and the challenges of structuring the deal so a combined company would pay U.K. tax rates.
Pfizer approached AstraZeneca again on April 26 about doing a deal, but AstraZeneca said it wasn't interested "absent a specific and attractive proposal," the British company said.
Under U.K. takeover rules, Pfizer has until May 26 to make a firm proposal or disclose that it is no longer interested in an acquisition.