Pfizer Expects $100 Billion Grab for AstraZeneca to Boost Pipeline and Drop Tax Rate

Reported by Annette Kreuger, Industrial Info Resources (Sugar Land, Texas)--Despite a host of headaches, including steep patent losses and an industry in continual reorganization, Pfizer Incorporated (NYSE:PFE) (New York, New York) has managed to remain one of the world's largest drug companies. With revenues of $51.6 billion in 2013, the company is now intent on spending at least $100 billion to snatch up AstraZeneca plc (NYSE:AZN) (London, England).

Pfizer first came calling on the British-Swiss drug maker in January of this year, offering roughly $77 per share of AstraZeneca's stock, a premium of 30% that translated to a total topping $98 billion. Soundly rebuffed, Pfizer came back with a $100 billion deal, which would be the second-largest pharmaceutical buy, topped only by the company's $112 billion purchase of Warner Lambert in 2000.

See below for chart detailing all North American Astra Zeneca and Pfizer facilities.

AstraZeneca would boost Pfizer's pipeline of lucrative cancer drugs and create significant cost and tax savings. Under British takeover rules, Pfizer has until May 26 to announce a firm intention to make an offer or walk away from what would be the largest takeover of a British company by a foreign interest.

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If the deal goes as planned, Pfizer would be one of the biggest U.S. companies to decamp for a foreign country. The new company would incorporate in Britain but be headquartered in New York, New York, resulting in tax benefits to Pfizer that could top $1 billion annually.

Pfizer plans follow in the footsteps of a growing number of U.S. drug makers, choosing to establish legal homes in tax-friendly countries such as Britain and Ireland. Coined "inversions," these deals require companies to transfer at least 20% of their shares to foreign ownership in exchange for huge tax savings.

Following its move from Parsippany, New Jersey, to Dublin, Ireland, in 2013, Actavis plc (NYSE:ACT) announced a $25 billion merger with Forest Laboratories Incorporated (NYSE:FRX) in February of this year. The new company will be based in Ireland, where the corporate tax rate is 12.5%--much lower than the combined U.S. federal and state corporate tax rate of 40% or more in New York and New Jersey. Although "based" in Dublin, Actavis maintains its administrative headquarters in Parsippany.


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