GlaxoSmithKline’s (LSE: GSK) (NYSE: GSK.US) shares have slumped nearly 12%, year to date, a disappointing performance for investors. However, these declines now mean that Glaxo’s total market value is around $116bn, $4bn below the $120bn offer that US pharmaceutical giant Pfizer recently made for Glaxo’s peer, AstraZeneca (LSE: AZN) (NYSE: AZN.US).
With this being the case, it’s entirely possible that Pfizer could come back and make a bid for Glaxo, as the U.S. behemoth searches for bolt-on acquisitions to boost growth.
Glaxo and Pfizer would fit together well. The two companies are already cooperating together on some projects, including an HIV joint venture and Glaxo has a strong presence within the vaccines market — something Pfizer is likely to find attractive.
What’s more, Pfizer is bound to be attracted by Glaxo’s low corporate tax rate of only 20%.
However, if Pfizer did to go ahead and launch a bid, Glaxo’s deal with Novartis would fall apart. Indeed, it is unlikely that Pfizer would be attracted to Glaxo’s world-leading consumer healthcare business.
Further, Pfizer would want to gain access to Glaxo’s oncology portfolio, which is being sold to Novartis as part of the deal.
Then there is the price to consider. It’s likely that Pfizer will have to offer a significant premium to Glaxo’s current share price, in order for the offer to be accepted by investors.
Specifically, City analysts believe that Pfizer would have to offer a premium of 40%, or just under 2,000p per share. A cost to Pfizer of around $170bn, some analysts believe that this figure is too large even for the world’s largest pharmaceutical company.
Meanwhile, it has also been rumoured that Pfizer will make another attempt to buy Astra during the next few months.
These rumours stem from the fact that Pfizer has recently been facing significant pressure from investors, after unveiling a poor set of half-year results. The company is now under pressure to re-enter negotiations in order to boost its treatment pipeline and flagging profits.
Pfizer has to wait until November before it can make another unsolicited approach for Astra, although if Astra’s shareholders for the company back to the table, an offer could be made sooner.
And it appears as if Pfizer is running out of time to cut a deal with a UK based company. According to people with knowledge of the matter, the process of tax inversion, where a company shifts its global tax base by buying a smaller rival, may be outlawed within the next 18 months, which would make any deal between Pfizer, Astra or Glaxo less attractive.
Rupert Hargreaves owns shares of GlaxoSmithKline. The Motley Fool recommends GlaxoSmithKline.