Pharmaceutical giant AstraZeneca lost nearly £18 billion in market value after reports emerged of a planned mega-merger with US rival Bristol Myers Squibb. The FTSE 100 firm's long-serving boss, Pascal Soriot, is said to be intent on pushing ahead with the deal, which could be announced as soon as today.
The transaction would mostly be secured through stock rather than cash, according to people familiar with the matter, with investment bank Morgan Stanley among advisers on the tie-up. Soriot is also understood to have secured tentative backing from the Government by pledging to keep the newly enlarged company's headquarters in Britain.
AstraZeneca shares tumbled 9 per cent, or 1132p, to 11,500p following a report in the Financial Times that the two firms had been discussing a merger for months. If completed, the deal would create one of the world's largest drugmakers, with a value of nearly £300 billion.
AstraZeneca declined to comment on the report, while Bristol Myers Squibb did not respond to a request for comment. The potential tie-up would rank among the pharmaceutical sector's largest mergers, though industry analysts met the news with little optimism.
Analyst skepticism and regulatory hurdles
Michael Leuchten, analyst at broker Jefferies, stated that the reason to combine was "not yet clear." He noted that many of the drugs AstraZeneca could pick up through a merger could be "sourced elsewhere… particularly in China."
"Given the strength of Astra’s growth and innovation profile, we are a bit perplexed," Leuchten added, highlighting that, as both firms have large cancer drug portfolios, a merger would also have to clear regulatory barriers on both sides of the Atlantic.
Leuchten also noted that, with British firm AstraZeneca effectively buying one of America's biggest drugmakers, a deal would carry a "political dimension," saying: "Astra would effectively be a UK-based acquirer of one of America’s large pharmas at a time when US policymakers are focused on domestic manufacturing and strategic industries… whilst this could be a way to continue expanding its US footprint, it would likely need to be navigated to reduce friction."
Market listing and growth strategy
A mega-merger would also fuel concerns that AstraZeneca could move its main stock market listing to New York, in what would be a hammer blow to the London Stock Exchange. Soriot has increased speculation by striking multi-billion-dollar deals in the US and has previously described Astra as a "very American company."
It has also pushed ahead with licensing deals for new medicines in China. News of a merger caught investors unawares, given Soriot said last week that the group did not "need mergers and acquisitions to deliver" its 2030 sales target of $80bn.
A tie-up would, however, vindicate his decision to reject a £70billion offer from US rival Pfizer in 2014, when Astra was vulnerable to a buyout. Since then, he has proved instrumental in turning around its fortunes and driving its value to £196billion.
