22nd April 2014
Shares in pharmaceutical giant AstraZeneca have soared by more then 7% on the back of reports that US drugs company Pfizer is preparing a takeover bid writes Philip Scott.
Over the Easter weekend, reports emerged that Pfizer had approached the UK firm about a £60bn takeover and according to a report in The Telegraph, the group has brought in Wall Street behemoths Goldman Sachs and Morgan Stanley to advise it on any fresh takeover move by its larger US rival.
By 15:00 AstraZeneca shares were up by 267.44p or 7.07%, to trade at 4,048.94p.
AstraZeneca was established in 1999 via the merger of Sweden’s Astra and the UK’s Zeneca, and about half of its total sales are generated from America. Over the past six months its shares are now up by 15% and 20% over the past six months and one-year respectively.
Commenting on the news James Griffin, manager of the Fidelity MoneyBuilder Growth Fund, says: “The news that US pharma giant Pfizer is considering a move for AstraZeneca highlights the potential for value realisation in the pharmaceutical sector, and UK large caps in general. There are many US companies, such as Pfizer, with cash ‘trapped’ abroad that they cannot repatriate for tax reasons.
“This adds to the case for corporate activity, but in particular in the healthcare sector, where there are businesses such as AstraZeneca and Shire which have undervalued pipelines that could be of huge strategic value to a competitor, even before cost savings.”
Any such deal between Pfizer and Astra he added would demonstrate how corporate buyers are willing to take a different perspective on valuation, taking a more fundamental and long term view than the market has recently.
AstraZeneca shares are currently rated a ‘hold’ according to the broker consensus on Digital Look but today Societe Generale reiterated its ‘sell’ recommendation on the business while analysts at Deutsche and Jeffries reaffirmed their ‘hold’ positions.
Elsewhere in the pharmaceutical sector Novartis and GlaxoSmithKline, have agreed a multi-billion-dollar deal to join forces.
Griffin says that given GlaxoSmithKline has the 12th largest oncology business, by selling it to Novartis it allows the company to focus on its core strengths of respiratory, vaccines and HIV, where the company is a world leader and an industry winner. It also becomes number one in consumer products as a result of its collaboration with Novartis he adds.