Home>Video>Pfizer-Astra Deal Will Get Done

Pfizer-Astra Deal Will Get Done

Mon, 28 Apr 2014

Cost-cutting, tax opportunities, and oncology synergies are motivating factors for Pfizer, and the firms will likely agree to merge, says Morningstar's Damien Conover.


Video Transcript

Damian Conover: Pfizer and AstraZeneca confirmed that they are in talks to merge, and while Pfizer offered close to $77 per share for AstraZeneca, AstraZeneca rejected the offer saying that the deal undervalued the full potential of the company.

We think the deal will likely get done, and we think there are three motivating factors for Pfizer. One is cost-cutting. Pfizer can cut a lot a costs from AstraZeneca. Second, there is tax opportunity with this acquisition and that Pfizer could lower its tax rate. And then third, the combination of the two companies really gives Pfizer a strong entrenchment in oncology, and this is a key therapeutic area were Pfizer wants to be in the future.

One important consideration for both Pfizer and AstraZeneca shareholders is the dividend, post the potential merger. As a lot of investors recall following the Wyeth transaction, Pfizer dramatically cut their dividend. We think that Pfizer's strategy and capacity constraints will more likely keep the dividend in place, but that is one area of concern for investors going in to a potential merger.

The next steps are that we think over the next 30 days, there'll be some more announcements. It could take a little bit longer for both sides to agree on the correct price, but we do think this deal will likely complete.

  1. Related Videos
  2. Related Articles
  1. Undervalued Pfizer Offers Great Dividend Opportunity

    Morningstar's Damien Conover expects steady growth for the wide-moat firm, which will likely lead to steady growth for the dividend.

  2. The Friday Five

    Bank of America makes a boo-boo, Twitter shares are still flying too high, Morningstar heads to Omaha, and more.

  3. Our 2014 Big Pharma Pipeline Rankings: Who Came Out on Top?

    Merck's reinvigorated pipeline and Sanofi's minimal patent-loss exposure placed them atop our rankings this year, while GlaxoSmithKline joined Pfizer toward the bottom.

  4. Significant Upside for Pharma Stock Prices, Dividends

    Pharmaceutical firms' adept handling of patent expirations has boosted investors' opinions of the sector, says Morningstar's Damien Conover .

  5. What's Behind All These Health-Care Deals?

    Recent M&A activity among health-care stocks indicates firms are homing in on core competencies and cost savings, but stock-buying ideas remain unclear.

  6. Bank Earnings Disappoint, but Dividends Distinguish the Best

    Ongoing legal expenses and varying loan growth hindered recent earnings for major U.S. banks, but better dividend yields bring Wells and JPMorgan ahead of their peers.

  7. Johnson & Johnson's Pharma Group Leading the Way

    The firm's consumer and medical-device group are lagging, but strong results from the pharmaceuticals side should drive earnings throughout this year and into 2015, says Morningstar's Damien Conover .

  8. 3 M&A Takeaways

    Merger activity sizzles in the food business, Apple experiments with Beats, and Pfizer stays disciplined.

©2017 Morningstar Advisor. All right reserved.