AstraZeneca (LON: AZN), the Cambridge-based pharmaceutical group, saw its shares fall sharply today after the Financial Times reported that the company has held preliminary talks with US rival Bristol Myers Squibb (NYSE: BMY) about a possible merger. Neither company has confirmed the veracity of the report.
AZN shares fell to 11,803p, down 6.6% from Friday’s close of 12,632p. AstraZeneca is Britain’s second-largest listed company, so a move of this size in early trade marks an unusually volatile session for a stock widely held by UK retail investors.
The FT reported yesterday, citing unnamed sources, that AstraZeneca and Bristol Myers Squibb have held talks over several months about a tie-up that could create one of the world’s largest drugmakers. AstraZeneca declined to comment, and Bristol Myers Squibb has not responded. Neither company has confirmed or denied that talks took place, and the report has not been corroborated beyond wire pickups of the FT’s account.
Reports put the combined deal value at roughly $400bn, or £300bn. AstraZeneca’s market capitalisation is about $195.9bn and Bristol Myers Squibb’s about $133.4bn, a combined $329bn today, so the $400bn figure attributed to the reports appears to build in a forward-looking premium rather than reflect the two companies’ current market value. A deal of that scale would face antitrust scrutiny given both firms’ large cancer drug divisions, and would revive memories of Pfizer’s failed 2014 attempt to buy AstraZeneca, which collapsed amid UK political and board resistance.
Chris Beauchamp, chief market analyst at IG, said: “Companies saying one thing and doing another is a well-trodden path, and AstraZeneca joins in with the reports of a proposed alliance with Bristol Myers Squibb, having only said recently that it didn’t need M&A to hit its targets. Though a rare example of a big UK firm buying a smaller US firm is something to warm the cockles of the British heart, it risks the departure of yet another national champion, and in any case the pair’s large cancer divisions is a major hurdle to a successful deal.”
AstraZeneca added a New York listing last year alongside a $50bn US manufacturing commitment, a shift toward the American market that adds context to any tie-up talk. Until either company comments, the report remains unconfirmed.