April 28 (Bloomberg) -- The largest proposed acquisition in drug-industry history may spark further deals as AstraZeneca Plc tries to sort out alternatives to Pfizer Inc.’s unsolicited 58.8-billion-pound ($98.7 billion) takeover approach.
AstraZeneca may seek a merger of equals with Amgen Inc. or AbbVie Inc., both of which have cancer programs, as a defense strategy, said Andrew Baum, a London-based analyst at Citigroup. Or the U.K. drugmaker may find itself the subject of further unwanted approaches from the likes of Sanofi, which would be attracted also to AstraZeneca’s diabetes assets.
Those scenarios are among the many swirling as investment bankers, analysts and investors puzzle out the ramifications of Pfizer’s announcement that London-based AstraZeneca spurned an acquisition proposal. AstraZeneca shares rose above the 46.61 pounds that Pfizer offered in January, indicating investors expect the company to be sold at a higher price.
Pfizer could raise its offer to try to entice AstraZeneca into negotiations, begin a hostile bid or walk away if AstraZeneca refuses to talk. Under U.K. takeover law, New York-based Pfizer has a month to decide whether to bid for AstraZeneca or to pull out.
“The game is open,” Odile Rundquist, an analyst with Helvea SA in Geneva, said today in an interview. “AstraZeneca will be under pressure to listen to Pfizer now. Astra could also seek a merger of equals with the likes of an Amgen. Or it could get another approach.”
Amgen hasn’t had any discussions with AstraZeneca and it wouldn’t fit the company’s strategy, said a person familiar with Thousand Oaks, California-based Amgen’s plans. The person asked not to be named because they weren’t authorized to speak about the matter on the record.
Amgen, the world’s biggest biotechnology company by revenue, declined to comment on the speculation, as did AbbVie.
Pfizer is considering its options, said Andrew Widger, a spokesman for the company, when asked if Pfizer would consider going directly to AstraZeneca shareholders with a hostile takeover offer.
“If and when there is a specific proposal or consummated transaction we will then be able to speak to specific aspects and details as appropriate,” he said in an e-mail.
AstraZeneca rose 14 percent to 46.67 pounds at the close in London, the highest value since at least 1993. Sanofi advanced 1.3 percent to 77.15 euros. Pfizer rose 4.2 percent to $32.04 at the close in New York. AbbVie climbed 3.5 percent to $50.87 and Amgen gained less than 1 percent to $111.48.
Bank of America Corp., JPMorgan Chase & Co. and Guggenheim Securities are providing financial advice to Pfizer while Skadden, Arps, Slate, Meagher & Flom LLP is its legal adviser. AstraZeneca listed Evercore Partners Inc., Goldman Sachs Group Inc. and Morgan Stanley as advisers in a statement today.
Pfizer approached AstraZeneca in January with the 46.61-pound-a-share acquisition proposal, and walked away when AstraZeneca declined to pursue talks, Pfizer said in a statement today. The proposal “very significantly undervalued” AstraZeneca and the U.K. company also was concerned that Pfizer wanted to pay 70 percent of the price in shares, AstraZeneca said in a statement today.
Reports this month of the talks sparked a rally in AstraZeneca shares and a flurry of other deals in the industry also refocused attention on mergers.
Pfizer Chief Executive Officer Ian Read contacted AstraZeneca Chairman Leif Johansson on April 26 for the first time since January, with no specific proposal, AstraZeneca said today. The U.S. company said it initiated the contact “in light of recent market developments.”
AstraZeneca decided that, “absent a specific and attractive proposal, it was not appropriate to engage in discussions with Pfizer,” the U.K. company said. Pfizer said it wants to negotiate an agreement that AstraZeneca’s board can recommend to shareholders.
AstraZeneca may have a tough time fighting off Pfizer.
“We continue to believe AstraZeneca’s bankers will struggle to deliver a strong defense to Pfizer’s approaches,” Citigroup’s Baum wrote in a note to clients today.
AstraZeneca could pursue a merger of equals with either AbbVie, the North Chicago, Illinois-based drugmaker split from parent Abbott Laboratories last year, or Amgen, the analyst wrote. Sanofi, France’s biggest drugmaker, may show interest in a bid for AstraZeneca, though Sanofi wouldn’t be able reap as much in cost savings as Pfizer from the deal, he said.
Sanofi doesn’t comment on market rumors, said Jack Cox, a spokesman for the Paris-based company. A spokeswoman AbbVie didn’t immediately return calls seeking comment.
Baum said Pfizer can sway AstraZeneca by offering at least 50 pounds a share. Others such as Naresh Chouhan, an analyst at Liberum in London, said it will take more than that.
“A price closer to 60 pounds would offer good value for AstraZeneca shareholders in our opinion,” he wrote in a note to clients today.
The company’s cancer drugs could spur other bids, Helvea’s Rundquist said. “AstraZeneca is attractive to many companies for its oncology pipeline as well as its emerging-markets footprint,” she said.
Under Pfizer’s proposal, the companies would be combined into a U.K.-based holding company, with headquarters in New York, Pfizer said. Buying AstraZeneca would allow the company to use some of the $70 billion of cash it has built up overseas that would be subject to taxes if brought back to the U.S.
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