After pulling out of a bid for AstraZeneca last year amid controversy on both sides of the Atlantic, US group Pfizer has been suggested as a potential predator for another UK pharmaceutical institution - GlaxoSmithKline.
Analysts at Deutsche Bank have taken a look at Pfizer and concluded a major overseas deal could make sense for the company.
In a note headed Introducing “PfizerKline”, the bank said:
Pfizer’s shareholder-friendly management team has previously stated that the company is open to acquisitions of various shapes and sizes. 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. As evidenced by Pfizer’s interest in AstraZeneca last year, one important goal for Pfizer has been to seek a deal that would maximize access to its balance sheet and improve its tax structure.
Since media reports in the past have pointed to the potential for a Pfizer/GlaxoSmithKline combination, we are revisiting that theme and presenting a pro forma analysis of this potential combo. In short, this potential combination could be materially accretive to earnings per share and discounted cashflow, while allowing Pfizer to unlock access to its balance sheet and improve its tax situation over time.
As a base case, we assumed a purchase price of £1924 a share [around $146bn or £95bn in total] funded with half stock/half cash, cost synergies of around $3.7bn, and a simple blend of tax rates.
Meanwhile Citigroup has resumed coverage of GlaxoSmithKline with a neutral rating and £15.50 price target.
GlaxoSmithKline’s shares are up 3p at 1445.5p.
This article was written by Nick Fletcher, for theguardian.com on Wednesday 20th May 2015 12.30 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010