Speculation is hotting up again that cash-rich Pfizer could make a move on GlaxoSmithKline later this year.
Market rumours on the potential tie-up have been growing for some time, but this week Deutsche Bank analyst Gregg Gilbert backed the deal in a note called “Introducing PfizerKline”, saying it would be “materially accretive” for both parties.
“Regardless of whether Pfizer decides to split the company into pieces at some point, we believe that the company has a sense of urgency to create value by leveraging the power of its balance sheet to do needle-moving deals,” he wrote, adding: “Since media reports in the past have pointed to the potential for a Pfizer/GSK combination, we are revisiting that theme.”
As a base case scenario, DB analysts assumed a purchase price of £1,924 a share, or around $146 billion in total, funded with half stock/half cash, cost synergies of around $3.7 billion, and a simple blend of tax rates, which should see Pfizer’s earnings per share boosted from 6% to 16% from next year, media reports note.
Pfizer’s move to buy AstraZeneca for $119 billion last year crashed and burned on strong opposition from all fronts. According to Gilbert, the attempt shows an important goal for the drugs giant is to “seek a deal that would maximize access to its balance sheet and improve its tax structure”.
But Bloomberg has cited analyst Andrew Baum as refuting the notion of a Pfizer/GSK marriage. “We doubt that GSK is a viable acquisition target for Pfizer,” Baum reportedly wrote in a note to clients, because “while Pfizer could use its offshore cash to invert into GSK and lower its tax rate, we anticipate that government resistance to preserve GSK as an independent listed company is materially higher than it was with AstraZeneca.”
However, a survey of 500 BioSpace readers found that 63% believe Pfizer will bid for GSK, 48% believe the offer will be made in the third quarter of this year, and 35% think the offer will be more than $120 billion.
