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April 29 (The following statement was released by the rating agency)
The acquisition of AstraZeneca Plc (AZ) would achieve
Pfizer, Inc.'s strategic aims as the deal promises significant benefits for the
combined entity, according to Fitch Ratings. The transaction would amass scale
for Pfizer, broaden the company's portfolio and pipeline and could provide some
Pfizer, which is headquartered in New York, Monday confirmed it had approached
London-based AZ in January 2014 regarding a possible merger, and again this
month. AZ confirmed discussions with Pfizer but said there was no specific offer
to acquire the company. Pfizer contends a completed transaction would combine
highly complementary innovative and established pharmaceutical businesses,
enhancing its ability to meet patients' needs.
Pfizer's interest in AZ represents a possible return to mega-deals not seen
since the last decade. Recent consolidation in the pharmaceutical industry has
been more targeted in nature. An AZ buy would broaden Pfizer's portfolio and
pipeline, just as when the company acquired Wyeth in October of 2009. The AZ
acquisition would cost Pfizer approximately $99 billion (compared to $68 billion
for Wyeth), and underscores Pfizer's experience with larger acquisitions.
Pfizer's January proposal to the board of AZ included a combination of cash and
shares in the combined entity which represented an indicative value of $76.62
per AZ share and a premium of approximately 30%. Pfizer said in a statement that
it is considering its options with respect to AZ.
Importantly, a company of Pfizer's size with approximately $70 billion of cash
tied up abroad would likely consider acquisition alternatives that are
accompanied by some sort of tax advantage. A completed Pfizer/AZ transaction
would likely result in a new U.K.-incorporated holding company, according to
Pfizer, and would translate to a lower tax rate than in the US.
An AZ acquisition would likely have a negative to neutral effect on Pfizer's
credit profile. However, the potential impact remains unclear until more
specific transaction details become available. Fitch affirmed Pfizer's Issuer
Default Rating (IDR) at 'A+' on April 4. The Rating Outlook is Stable.
We anticipate Pfizer will continue to generate strong free cash flow and
maintain solid liquidity during the intermediate term, with significant
international cash balances and adequate access to the credit markets. Fitch
believes Pfizer will continue to aggressively deploy cash toward acquisitions
and share repurchases.