Healthcare giant Pfizer (NYSE:PFE) revealed that it tried to buy pharmaceutical company AstraZeneca (NYSE:AZN) for nearly $100 billion, but was rebuffed. Pfizer tried to purchase AstraZeneca in January, and revisited conversations over the weekend.
In a statement, AstraZeneca said the proposed deal “very significantly undervalued” the company. In particular, the AstraZeneca board expressed concerns about the deal structure. Pfizer proposed paying 70% in stock and 30% in cash, valued at $98.9 billion.
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Pfizer says it still plans to pursue AstraZeneca, believing that the combination would be mutually beneficial. “A transaction would bring together highly complementary innovative and established pharmaceutical businesses, enhancing the combined company’s ability to meet patients’ needs,” said the company statement.
Pfizer says it believes the merged companies could create innovative drug treatments. “We believe patients all over the globe would benefit from our shared commitment to R&D,” said Pfizer chief Ian Read. The combination is “critical to the future success of the pharmaceutical industry, in the form of potential new therapies that help to fight some of the world’s most feared diseases, such as cancer.”
AstraZeneca’s portfolio would significantly boost Pfizer’s line of cancer drugs. The pharmaceutical company has been investing in experimental treatments known as “immunotherapies” that help patients fight tumors.
Frank Aquila, M&A partner at Sullivan & Cromwell, says the purchase would provide several strategic benefits for Pfizer.
“Their R&D pipeline is not producing products with sufficient revenues to fill the gap created by their patent cliff,” he said. Joining forces with AstraZeneca would improve the top line.
Aquila adds that “Pfizer is also no doubt aware that becoming a non-US taxpayer will mean a lower effective tax rate in the future.” Pfizer hopes to combine the drugmakers via a UK-incorporated holding company.
Pfizer is being advised by Bank of America Merrill Lynch, JPMorgan and Guggenheim Securities.
Pfizer shares are up 4% Monday, near $32. AstraZeneca shares are up about 14% at $78.
If Pfizer succeeds in its pursuit of AstraZeneca it could be the second-largest healthcare acquisition ever. Pfizer holds the record for the top deal, with its purchase of Warner-Lambert for $112 billion in 1999.
Year-to-date there have been $163 billion in global healthcare deals, the best pace on record. The proposed Valeant Pharmaceuticals (NYSE:VRX) acquisition of Allergan (NYSE:AGN) comes in at $47.4 billion. Actavis (NYSE:ACT) is also in the process of purchasing Forest Laboratories (NYSE:FRX) for $25.3 billion. Forest itself announced Monday that it plans to buy Furiex Pharmaceuticals for $1.5 billion.