Pfizer-Astra: a record takeover?

America’s drug giant Pfizer, the maker of Viagra, confirmed this week that it is pursuing its British rival AstraZeneca (AZ). Pfizer said it made a $100bn cash-and-shares offer in January, which AZ says was far too low.

Having gone public, the US giant now has a month to make a formal offer. If successful, this would be the biggest foreign takeover of a UK company to date.

What the commentators said

AZ “has been trying the patience of its shareholders for some time now”, said James Moore in The Independent. The business has “perked up” recently, and it has some interesting potential treatments in development, notably in immunology. “But investors could still be forgiven for questioning whether the company’s senior figures are capable of delivering on the promise these may offer.”

Still, AZ will insist on a higher price, with Pfizer needing to offer at least £50 a share versus January’s £46.61 offer, reckoned Citigroup’s Andrew Baum.

The deal has “some strategic merit” for Pfizer, said Helen Thomas in The Wall Street Journal. It will give its oncology portfolio a hefty boost and bulk up its cardiovascular and diabetes medicine divisions. But ultimately “this looks like a deal made possible by financial engineering”.

Pfizer can sidestep US taxes on both corporations and overseas earnings. If it buys AZ with enough of its own shares, it can re-domicile for tax purposes to Britain, where corporation tax of 21% compares favourably with its current effective rate of 27%. And its overseas cash pile, which would incur taxes if repatriated, would be protected.

While Americans may be irked by a US multinational going abroad to dodge taxes, Britons will fear that “Pfizer supports British erections but not British jobs”, as Jonathan Guthrie put it in the FT.

The last time Pfizer made a big purchase, of rival Wyeth in 2009, it led to the loss of 2,400 jobs. We are about to find out, said the FT’s Lex, who has “a greater capacity for indignation: a British politician or an American one”.

Merryn

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