Pfizer-Astra: a record takeover?

published 2 May 2014

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

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.

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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".

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.