City scores drug deal fee bonanza

CITY investment banks could be in line for a $240m (£143m) jackpot after America’s biggest drug company confirmed it had reignited bid talks with its UK rival, opening the door for the largest ever foreign takeover of a British company.

Pfizer, which makes drugs like Viagra and Centrum, unveiled an audacious bid to buy AstraZeneca, in a deal that could cost more than $100bn (£65bn).

The deal is the latest in a string of buyouts in pharmaceuticals, with reports emerging last night that botox-maker Allergan could be ready to bid for UK-listed Shire. Allergan itself is the target of a $46bn hostile offer from Valeant and activist investor Bill Ackman, and may seek a tie-up with Shire to fend off its suitors.

Seven banks on the Pfizer-AstraZeneca deal, including Goldman Sachs and JP Morgan, are set to pocket between $200m and $240m if it gets over the line, according to Thomson Reuters, adding to the swelling pot of M&A fees collected on pharma deals so far this year. A record $190bn of tie-ups are now on the table, including GlaxoSmithKline’s deal with Novartis announced last week.

The Pfizer offer led to a transatlantic stampede for pharma shares yesterday, driving a 50 per cent spike in the amount of AstraZeneca shares changing hands in London, helping it close up 13 per cent. In the US, Pfizer investors sent shares up 3.25 per cent – despite the vast amount of cash the firm would pay to complete a deal.

AstraZeneca yesterday said an initial offer made by Pfizer in January of £46 a share “significantly undervalued” the business, which employs nearly 7,000 people in the UK. Pfizer chief executive Ian Read said: “They’re sellers and we’re buyers, of course they’re going to say there’s a value gap.”

Analysts have suggested that Pfizer may have to pay as much as £56 per share to seal the deal.

The bid echoes the £12bn takeover of Cadbury by US firm Kraft in 2009, which generated significant political heat.

Last night business secretary Vince Cable indicated he would be prepared to intervene in the deal if UK jobs would be lost.

Cable said Read had been in touch to discuss the merger and reiterated the government’s concerns over jobs and skills being lost.

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