Lately, M&A reporting has been going a bit gonzo. This week alone we’ve had a recruitment website claim that Occidental Petroleum was about to buy Apache (denied) and reports on a Spanish-language site that Reckitt Benckiser had outbid P&G in an auction to buy Church & Dwight (also denied). Meanwhile, the more reputed media were running with stories about Bayer bidding for Monsanto (first denied, then confirmed).
This upsurge in bum steers, bogus denials and half-baked tales in obscure places makes FT Alphaville’s RAW warning ever more essential. Please, read the damn warning.
The formal announcement is out on Pfizer’s planned takeover of Allergan. It’s an all paper deal which values the Dublin-based target at $160bn.
The guff starts right up there in paragraph one, referencing…
a leader in a new industry model – Growth Pharma
Back in the day, hostile takeover battles in the UK were fought, at least partially, through full page adverts in the press.
It was a great money spinner for newspapers and helped fund the growth of business journalism in the 1980s, as a wave of bids were accompanied with bold — and often aggressive — purchased media messages.
But it all got out of hand and the ever-so-sensible Takeover Panel decided to introduce Rule 19.4, which effectively put an end to the practice. (Colleagues think the epic battle over the Forte hotel group in the mid-1990s was the final straw, though we stand to be corrected.)
Moving forward in time to the big takeover battle of today… Read more
The attempt by US drug company Pfizer to buy AstraZeneca, the crown jewel of Britain’s pharmaceutical industry, has prompted entirely predictable reactions.
There is outraged huffing and puffing from the left and from vested interests about the loss of the UK science base. Even the FT has joined in with the pseudo-dirigism more usual in the Guardian or Le Monde, calling for an independent assessment of takeovers which might damage UK science… Read more
The nationalistic bluster around AstraPfizica remains blustery. Here, for example, is London Mayor Boris Johnson:
It would be very important to establish that Pfizer is genuinely committed to R&D in this country. I believe in principle that we should have an open system of markets in this country, but when I look at something like AstraZeneca and I look at an organization of that scale, of its relative importance to the UK economy, the sheer percentage of its money that goes into R&D, I think it is of great importance to Britain.
With that in mind, it’s worth taking a closer look at the experimental drug pipeline AstraZeneca has highlighted in its defence statement. These are the drugs that management expects to deliver an incremental $19bn of sales from 2017 to 2023, equivalent to 10 per cent revenue growth per annum: Read more
Pfizer, the US drugs giant that would like to buy the UK listed AstraZeneca, has promised that it would keep at least a fifth of the enlarged group’s research and development in the UK for five years if it did so, part of a spirited row over the public interest, and one that has prompted MPs to summon executives to a Business Committee hearing at the House of Commons.
Away from questions about the strategic value of a large and half-Swedish pharmaceutical company, the whole idea of corporate assurances of the non-binding contractual variety is an interesting subject, and one where Pfizer has some history, albeit in somewhat different circumstances. Read more
The FT reports that Pfizer is weighing plans to raise about $3bn this year through a part-flotation of its animal health division, as the drugs giant examines the best way to spin off a business valued at as much as $18bn. The pharmaceuticals group, the world’s second largest by market capitalisation, has been talking to bankers about arranging an initial public offering that would look to place up to 19.9 per cent of the unit’s shares in the autumn, in what is known as an equity carve-out or partial spinoff, people familiar with the talks said. Floating a stake in a business ahead of a spinoff is a common tactic to help establish a shareholder following for a unit, improving its ability to trade as a standalone company. It comes as the value of spinoffs globally is set to double this year.
Mengniu Dairy, one of China’s largest milk producers, is considering a bid for Pfizer’s infant nutrition business as potential buyers prepare for the start of the sales process next month. The FT reports people familiar with the matter said that Mengniu was talking to UBS about a bid for Pfizer’s unit, which the pharmaceutical company said in July it would sell or spin off to its shareholders. With $1.9bn in revenues in 2010, the business could be worth as much as $10bn, industry specialists said. While Pfizer, advised by Morgan Stanley and Centerview, is expected to send out information to possible buyers next month, the process has moved more slowly than expected, the people said. Other bidders expected to participate in the sales process are Danone, advised by Lazard and JPMorgan; Nestlé, advised by Rothschild; and Mead Johnson, which is working with Goldman Sachs. Heinz may also be interested, people following the situation said.
The search for the elusive US-AAA alternative continues.
As Nomura’s Charles St-Arnaud and Lefteris Farmakis already pointed out on Wednesday, there’s not really all that many options left. Read more
Pfizer, the US pharmaceutical group, said it is examining shedding its animal health and nutrition units as part of its efforts to streamline its activities, while retaining its generics business. The FT reports the move comes after the company earlier this year said it was reviewing its mix of businesses, at a time of investor criticism over poor returns. With $5.5bn in combined revenues, the two businesses constitute a small slice of Pfizer’s $68bn sales, thwarting some investors’ hopes that it would opt for more radical surgery. Pfizer has resolved to hold on to its established products division, which sits within its biopharmaceutical business with revenues of $10bn last year. It has hired JPMorgan to explore alternatives for animal health, while Centerview and Morgan Stanley will work on the nutrition business. The transactions could take up to 24 months, the company said.
The UK’s Medical Research Council is in advanced talks with Chinese authorities to attract up to £500m in investment to the UK over the next five years in an innovative partnership that could save 850 scientific jobs. The FT says discussions centre on a new drug development company that would salvage employment at British pharmaceutical research facilities earmarked for closure. Dave Tapolczay, head of MRC Technology, the commercial arm of the UK research funding body, said the talks could be finalised as soon as Friday. Talks are focused on hiring specialists from sites including AstraZeneca’s Charnwood operations, Pfizer’s Sandwich plant and Merck’s Newhouse facility in Scotland, all being shut with the loss of hundreds of jobs.
Pfizer has agreed to sell its Capsugel business to private equity group KKR for $2.375bn in cash, in a move analysts said could be the first in a series of spin-offs and sales, the FT reports. The disposal, announced on Monday, will allow Pfizer to buy back common stock this year in excess of its planned $5bn in repurchases. Pfizer also lowered its revenue forecasts for 2011 from $66bn-$68bn to $65.2bn-$67.2bn and trimmed its 2012 revenue guidance. Pfizer’s sale of Capsugel, which earned about $750m in revenue last year, and its unchanged earnings guidance despite the resulting drop in sales suggest Pfizer may spin off other businesses. The company this year unveiled a strategic review to take place under CEO Ian Read. The WSJ says other units that Pfizer could sell include those producing animal drugs, nutritional products including Promil infant formula, and consumer health-care goods as Advil pain and cold medicine.
Pfizer has agreed to sell its Capsugel business to US buy-out group KKR for $2.375bn in cash, in a move that analysts said could herald more spin-offs and sales in the sector, reports the FT. The disposal, announced on Monday, will allow Pfizer to buy back common stock this year in excess of its planned $5bn in repurchases. Pfizer also lowered its revenue forecasts for 2011 from $66bn-$68bn to $65.2bn-$67.2bn and trimmed its 2012 revenue guidance. Pfizer’s sale of Capsugel, which earned about $750m in revenue last year, and its unchanged earnings guidance despite the resulting drop in sales suggest Pfizer may spin off other businesses. The company this year unveiled a strategic review to take place under Ian Read, the CEO appointed in late 2010 after the abrupt departure of Jeff Kindler. The WSJ looks at other possible disposals for Pfizer.
Pfizer’s board is facing criticism over the abrupt departure last weekend of Jeffrey Kindler, CEO of the US pharmaceuticals group, reports the FT. The appointment of Ian Read to replace Kindler, without external candidates being considered, has revived analysts’ concerns over the longer-term performance of the company and its board. Pfizer plans to appoint a non-executive chairman within two weeks, splitting the two jobs formerly held by Kindler. Some critics argue a strong external chairman with industry experience should be appointed as part of a broader restructuring of the board, which they say lacks operational knowledge of the sector. The WSJ meanwhile examines the circumstances of Kindler’s departure.
Pfizer Inc, the world’s biggest drugmaker, on Sunday named Ian Read chief executive officer to replace Jeffrey Kindler, who has retired, reports Bloomberg. The surprise move comes as Pfizer braces for the potential loss of nearly 24% of its sales next year when Lipitor, its best-selling cholesterol drug, faces generic competition for the first time. Read, 57, who heads Pfizer’s biopharmaceutical operations, will take over after a 36% decline in Pfizer’s share price under Kindler since mid-2006. But, notes DealBook, Kindler’s $68bn deal for Wyeth, the first mega-merger since the 2008 financial crisis, triggered a deal frenzy in the pharma sector and inspired various companies to take a risk on M&A again.
Pfizer has agreed to buy King Pharmaceuticals, a maker of prescription pain treatments, for $3.6bn in cash as the world’s largest drug company by revenues seeks to diversify its portfolio before it loses patent protection on key drugs, the FT reports. Pfizer will pay $14.25 a share, a 40 per cent premium over King’s closing share price on Monday, valuing the company at about seven times earnings before interest, tax, depreciation and amortisation in 2009. Cheaper copies of Lipitor, Pfizer’s best-selling cholesterol drug, which had sales of $11.4bn in 2009, will enter the market next year and like many pharmaceutical groups facing similar threats, Pfizer has looked to deals to offset the impact. Pfizer has looked to deals to offset the impact. In 2009, it paid about $68bn for rival Wyeth and the company has carried out about 30 deals in the past five years. Even so, analysts expect its sales to fall sharply between 2010 and 2015.
The Department of Justice is scrutinising payments by leading pharmaceuticals companies for hospitality, consultants, licensing agreements and charitable donations in markets around the world as part of a wide-ranging corruption probe, the FT reports. GlaxoSmithKline, Pfizer, Bristol-Myers Squibb and Eli Lilly, among others, have disclosed being contacted by the DoJ and SEC in connection with the investigation, which comes after lawyer warnings that investigators would soon turn their focus on international corruption in the sector.
The US Department of Justice is examining payments by top pharmaceuticals companies for hospitality, consultants, licensing agreements and charitable donations around the world as part of a sweeping corruption probe, reports the FT. GlaxoSmithKline, Pfizer, Bristol-Myers Squibb, Eli Lilly and Merck, among others, have confirmed they were contacted by DoJ and SEC officials in connection with the probe. Investigators are examining whether pharma companies ignored a “systematic risk” inherent in the global drugs business and ignored obligations under local and US anti-bribery laws, said a lawyer familiar with the probe. Reuters reports that shares in SciClone plunged 41% on news it was under investigation.
Sanofi-Aventis of France has sent a takeover proposal valued at about $18.4bn or $69 per share, to US biotech company Genzyme and the two sides are discussing the offer, reports Reuters on Monday. Sanofi’s board last week authorised the company to make a formal offer for Genzyme worth up to $70 per share, or $18.7bn, but Genzyme is unlikely to accept a deal under $80 per share, or $21.4bn, sources told Reuters. DealBook adds that Genzyme has also received “soft inquiries” from other drug makers, including GlaxoSmithKline, Pfizer and Johnson & Johnson.
Pfizer, the world’s largest pharmaceuticals group, on Tuesday confirmed it would cut 6,000 jobs, or 18% of its production staff, as part of a global restructuring triggered by last year’s takeover of Wyeth, the FT reported. The cuts come as large drugs companies move to slash costs amid growing price pressures, aggressive competition by manufacturers of generics and a dearth of new drugs to replace those with expiring patents.
Pfizer has admitted it paid $35m over a six month period to 4,500 doctors who worked with the company on the development and marketing of new drugs, and helped “educate” other doctors on their use, the FT reports. The drugmaker made the disclosure as part of a government settlement after it pleaded guilty last year to illegally promoting more than a dozen of its own drugs.
Pfizer, the world’s biggest drugmaker, is bidding as much as €3bn ($4.08bn) for German generic-drug maker Ratiopharm and could make a presentation to Ratiopharm’s management this week, reports Bloomberg. Teva Pharmaceutical Industries of Israel and Iceland’s Actavis Group are also bidding, and Ratiopharm is expected to decide within March. The FT adds that Ratiopharm, being sold by the indebted empire of the late Adolf Merckle, will give the three bidders access to full-year accounts by mid-March.
A recent flurry of deals in the pharmaceutical sector highlights what savvy investors have known for some time — vaccines are the new M&A targets.
The Wall Street Journal notes on Monday that the recent health scares over global pandemics and the growing involvement of governments in purchasing vaccines en masse have become key driving forces in the thriving world of pharma M&A. Read more
This CDS report was written by Markit’s Gavan Nolan
European credit indices gave back some of their recent gains, prompted by profit-taking and mixed signals from the US. The Markit iTraxx Europe index was back above 100bp, closing at 101bp. The Markit iTraxx Crossover and HiVol indices both widened, though the latter still resided under the 200bp mark. Widening credits only marginally outnumbered those that tightened, with defensive names performing better than their cyclical counterparts. Banks, affected by mixed results in the US, and autos were among the laggards.
Europe has been taking its lead from the US in recent weeks, and today was no different. Both equity and credit markets had a slew of earnings reports to digest, as well as news from the housing market. Pharmaceuticals provided additional momentum to the current rally. Pfizer‘s spreads tightened despite posting a 19% fall in second-quarter profits. But excluding one-off items, the 48 cents a share profit came in ahead of expectations. The company also upgraded its forecast for 2009 earnings to a range of $1.90 to $2 a share, up from its previous estimate of $1.85 to $1.95 a share. Eli Lilly‘s second-quarter figures were even more impressive and it also upgraded its full-year forecast. However, some interpreted the upgrade as conservative and its spread tightening was limited a result. Read more
After the recent flurry of big deals in the pharmaceutical sector – think Pfizer’s $68bn bid for Wyeth, Roche’s $47bn offer for the chunk of Genentech it did not already own and Merck’s $41bn takeover of Schering-Plough – it was only a matter of time before the rumour mill started to whirl into action. Read more
Caterpillar, the world’s largest maker of construction equipment, said it would cut 20,000 jobs as it reported an annual fall of more than 32% in Q4 profits – a month after slashing executive salaries and jobs at large plants. Sprint Nextel, the US mobile-phone operator, said it will cut 8,000 jobs, or 14% of its workforce, while DIY retailer Home Depot is cutting 7,000 jobs and freezing salaries. Pfizer said 19,500 jobs would go after its takeover of US rival Wyeth, while carmaker GM announced 2,000 job losses at two plants in Michigan and chipmaker Texas Instruments said it would cut 3,400 positions. IBM meanwhile cut 2,800 jobs last week. In Europe, ING said it would axe 7,000 of its 130,000 global staff and Philips 6,000 jobs while Corus, Britain’s largest steelmaker, announced cuts of 3,500 from its global workforce of 41,000, with more than 2,000 jobs to go in the UK where it employs 20,000.
Pfizer on Monday unveiled a $68bn takeover of Wyeth, reasserting its flagging position as the world’s largest pharmaceuticals group and paving the way for a fresh bout of consolidation across the sector. The acquisition – to be paid for with equal amounts of cash, equity and debt – creates a group with $71bn in sales and plans to save $4bn in annual operating costs by cutting 15% of its combined workforce. Pfizer earolier reported a 4% fall in Q4 sales to $12.4bn and a 90% drop in net income to $266m after a $2.3bn settlement with the US district attorney of Massachusetts over the marketing of painkiller Bextra.
This CDS report was written by Markit’s Gavan Nolan
European credit indices tightened today, helped by positive sentiment in the financial sector. Barclays, the subject of intense speculation last week, made an effort to silence the rumour mill today. The bank wrote an open letter to investors outlining its financial position. Barclays will record an £8 billion writedown on credit positions when it reports on February 9 – a week ahead of schedule. While the writedown can hardly be regarded as good news, it was not unexpected and investors were focused on whether this would affect its capital position. Barclays was clear in that its strong performance over the year means it will not be seeking further capital. It has, however, initiated discussions with the government about participation in the asset insurance scheme.
Dutch bank ING was another to announce significant writedowns. The bank posted a EUR3.3 billion loss, primarily as a result of asset impairments totalling about EUR5 billion. But its spreads rallied after the government came to its rescue again. The Dutch government will take on the bulk of the risk from ING’s Alt-A US RMBS portfolio, thereby improving its risk profile. Read more
Pfizer was nearing agreement Sunday night on a deal to buy rival drug maker Wyeth for about $67bn in a move that would reshape the global drug industry. Pfizer will pay the equivalent of $50.19 per share for Wyeth – comprising $33 in cash and 0.985 of a share of Pfizer stock for each Wyeth share. The two companies spent Sunday hammering out the exchange ratio and other details, including who would fill remaining seats on the combined board. Pfizer expects to raise $25bn to help fund the deal and has lined up commitments from Bank of America/Merrill Lynch, JPMorgan and Goldman Sachs and is in talks to bring others in.