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Pfizer confirms interest in AstraZeneca megamerger

Says it has twice tried to engage in merger talks with big pharma rival
Pfizer AstraZeneca

After several days of speculation, Pfizer has confirmed it is interested in a merger with AstraZeneca (AZ) and has contacted the company twice to try to start negotiations.

In a statement, Pfizer said it first contacted AZ about a possible link-up in January but after "limited high-level discussions" AZ brought them to an end. Pfizer decided to try again earlier this month "in light of recent market developments", but said once again AZ declined to enter negotiations.

The previous offer was at a value of £46.61 per AZ share, a 30 per cent premium to the share price on January 3, although AZ's stock has risen to around £40 in the interim. Confirmation of Pfizer's interest this morning had sparked a surge in AZ's shares of around 12 per cent at the time of writing.

Pfizer said merging the two companies would "bring together highly complementary innovative and established pharmaceutical businesses," although AZ seems less convinced, with chief executive Pascal Soriot asserting AZ's commitment to independence just last week.

In light of AZ's reluctance to come to the negotiating table Pfizer has said it is "considering its options," while appealing to shareholders in the UK-headquartered company to consider the "highly compelling opportunity."

The combined group would be headquartered in New York but have management in the UK and operate under a UK holding company - following the trend among many corporations to base themselves overseas in order to tap into more favourable tax rates.

Pfizer chief executive Ian Read also acknowledged the UK's efforts to create incentives for companies to manufacture products and protect intellectual property.

"Patients all over the globe would benefit from our shared commitment to R&D," he said, with a broader pipeline and plenty of new product launches to drive growth. He also stressed that a merger would not interfere with its proposals to separate businesses - Pfizer has already sold off its animal health and nutrition units and there has speculation that additional divestments may follow.

Analysts have suggested that the AZ interest may be an effort to bulk up the group in core areas - such as cancer - before shedding less profitable businesses.

Read also noted that any firm offer would be reliant on a due diligence review and the unanimous recommendation of AZ's directors.

Article by
Phil Taylor

28th April 2014

From: PME

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