The British-Sweden multinational pharmaceutical AstraZeneca has decided to buy the American pharmaceutical, Alexion for a $39 billion deal through a combination of cash and shares. The deal values Alexion at a 45% premium to the closing price, $175 per share. The deal is the largest in the history of AstraZeneca which came into existence in 1999.
Details Of Alexion’s Takeover By AstraZeneca
The transaction is expected to conclude in the third quarter of 2021 with Alexion’s shareholders retaining 15% ownership of the combined entities. AstraZeneca will fund the deal with a $17.5 billion financing facility from Morgan Stanley, JPMorgan Chase, and Goldman Sachs Group.
Advisers
The lead financial advisers to AstraZeneca included Evercore and Centerview while the capital markets adviser was Ondra. Legal advice was given by Freshfields. Alexion was advised by Bank of America and Wachtell.
Synergies Following The Merger
Post the deal, the earnings will increase immediately with the annual synergies of around $500 million forecasted three years after the conclusion. According to Pascal Soriot, AstraZeneca’s Chief Executive, the synergies would partly result from the reduced workforce in general administrative functions. Alexion has around 3,000 employees whereas AstraZeneca around 70,000.
Liabilities
According to the terms of the deal, Alexion will be liable to pay $1.2 billion in break fee to AstraZeneca in certain situations which include completion of an alternative merger or a change of Alexion’s board recommendation. AstraZeneca will be liable to pay $1.4 billion in break fee to Alexion under specific circumstances which include a change of AstraZeneca’s board recommendation.
AstraZeneca’s Aim
Alexion works on providing specialized treatments for rare diseases. The deal would allow AstraZeneca to broaden its portfolio through the addition of cures for cancer, blood disorders, and other illnesses. The takeover will strengthen AstraZeneca’s focus on immunology. The treatment of such rare illnesses drives in higher revenues from a relatively small portion of patients.
Mergers & Takeovers
AstraZeneca had been on the lookout for a large target that could be acquired as the Chief Executive Pascal Soriot looked to benefit from a rising share price. It had been in the talks with Gilead Sciences earlier in June. If the two had merged, the transaction would have been the biggest in the health industry at the time. Moreover, AstraZeneca was also on the verge of being taken over by Pfizer six years ago, but the company defended itself against the takeover bid.
Development of the Coronavirus Vaccine
The multinational pharmaceutical firm collaborated with Oxford University to work on the COVID-19 vaccine. It promised to sell the vaccine at cost during the pandemic and make no profit to developing nations. However, the pooled average efficacy of the vaccine is 70%, way less than the competitors.
What Does Alexion Produce?
Alexion on the other hand has been in the works of developing drugs for a few years and is known most for its drug, “Soliris”. Soliris is a monoclonal antibody that is used to cure diseases like Paroxysmal Nocturnal Hemoglobinuria (PNH) and atypical Hemolytic Uremic Syndrome (aHUS). Soliris alone accounted for $4 billion in revenue in 2019. Alexion launched another drug called Ultomiris. It announced in April to run late-stage tests of the drug on patients gravely affected by COVID-19.
Alexion’s Management
The company had been previously pressured to sell itself by activist fund Elliot Management according to which the management was stumbling. Alexion got into a deal with Portola Pharmaceuticals earlier this year. But the transaction was resisted by Elliot Management who said that the deal didn’t make strategic sense and wasn’t suitable with Alexion’s focus on rare illnesses.
Performance of Shares
AstraZeneca’s shares have been doing fairly well on the market. It has increased 7% this year and around 70% over the last three years with a market value of $142 billion. Contrastingly, Alexion’s shares have been struggling over the years. Elliot Management had invested in Alexion back in 2017 when the shares of the company were only slightly lower than what they are today. The shares closed at $121 Friday.
As a result of the acquisition, Alexion’s shareholders will receive $60 in cash and 2.1243 AstraZeneca American Depository Shares for each Alexion share held.
The deal would allow both companies to leverage each other’s strengths. Alexion would add to AstraZeneca’s power in the US where AstraZeneca has been reinforcing its foothold recently, specifically in oncology. Alexion, conversely, has a limited presence in emerging markets with almost no presence in China. AstraZeneca has a strong position in both of these areas meaning it could globalize Alexion’s portfolio more effectively and efficiently.
The deal has been approved by the boards of both companies and is subject to approval by shareholders and regulators.
I am Sophia william, author of World Stock Market. I have a degree in journalism from the University of Missouri and I have worked as a reporter for several news websites. I have a passion for writing and informing people about the latest news and events happening in the world. I strive to be accurate and unbiased in my reporting, and I hope to provide readers with valuable information that they can use to make informed decisions.
