London, April 20: Pfizer, the world’s biggest drug company, has made a tentative approach to AstraZeneca about a possible takeover that could value its British rival at more than £60 billion ($100 billion).
Informal conversations about a possible tie-up have taken place in recent weeks, according to senior investment bankers and industry sources.
A sale of Astra will be the biggest-ever foreign takeover of a UK business. It is Britain’s tenth-largest company with 50,000 employees globally.
Astra is believed to be resisting Pfizer’s advances and no talks are currently underway, say insiders. However, Pfizer, famous for its anti-impotence drug Viagra, could come back with a fresh approach.
The New York company is keen to deploy a $70-billion (£42 billion) cash pile that it has accumulated in overseas subsidiaries. Repatriating the cash to America so it could be distributed to shareholders would lumber it with a colossal tax bill.
Pfizer is said to be weighing several big deals that could swell its pipeline of new medicines. Patents on many of its top-selling drugs are expiring, including Viagra and the anti-cholesterol treatment Lipitor — leaving those products open to competition from generic rivals.
Industry sources said Pfizer would have to pay a substantial premium to Astra’s current share price, which closed at £37.81 on Friday, giving the company a market value of £48 billion.
Pfizer, valued at $193 billion on the New York market, has a history of doing big deals to boost sales and slash costs. Its last sizeable acquisition was the $68-billion purchase of its US pharmaceutical rival Wyeth in 2009, while the takeover of Warner-Lambert in 2000 for $93 billion is one of the largest corporate transactions of all time.
Astra faces serious problems of its own, with several big-selling drugs losing patent protection. It has, however, enjoyed something of a renaissance under new chief executive Pascal Soriot. Although sales have started to drop, Soriot has said he will get the company back on a path to growth by 2017.
He has made strides to improve the pipeline of new treatments, with the market having high hopes for a new class of cancer drugs that work by harnessing the immune system to fight the disease.
Pfizer and Astra know each other well. Last week, the pair announced a collaboration with Cancer Research for a new lung cancer treatment.
On Thursday, Astra will announce financial results for the first quarter of this year. Analysts at JP Morgan expect it to report sales of $6.4 billion. Astra and Pfizer both declined to comment.