Is a Pfizer-AstraZeneca merger in the offing?
Investment bankers on two continents were working overtime in the past several days as a flurry of transactions have been announced in the past 24 hours. The upshot: GSK will deepen its stake in consumer healthcare products by purchasing Novartis assets, while the latter will deepen its investment in oncology with GSK assets. Eli Lilly becomes the No. 2 animal health company worldwide by picking up GSK’s business there. Meanwhile, Valeant Pharma, having gobbled up Bausch+Lomb last year, has issued what could become a hostile takeover bid of Allergan. In an unusual move, it is allied with Pershing Capital, a “activist” investment firm led by William Ackman, which has already acquired 10% of Allergan. Usually, such activist investors take a position in a company, agitate for change, and then hope to benefit from either a friendly “white knight” acquirer or a restructuring of the target company. Ackman has stated that Pershing Capital will retain stock ownership in the eventual combined entity.
In after-hours trading on April 21, and after markets opened on April 22, all of the firms involved saw their shares rise—in Allergan’s case, by over 25%; typically, such a positive response means that the acquisitions and transactions will go through (barring governmental actions) without shareholder objection, although the dramatic price rise of Allergan could elicit other bidders.
The deal that has only been rumored about is Pfizer bidding $101 billion for AstraZeneca; according to various reports, the deal has been rejected by AZ. In the Valeant-Allergan deal, Valeant’s CEO, J. Michael Pearson, said that Allergan “made it clear, both privately and publicly, that they were unwilling to enter discussions with us about creating a value-enhancing combination.”
Valeant has a reputation for stripping acquired assets of what it considers non-essentials; in its bid, while noting that the combined company would be spending $300 million annually on Phase III R&D, Pearson also said that “The New Company will sell or eliminate Allergan’s earlier stage programs where Allergan’s track record has been largely unproductive.”