After announcing its biggest transaction in history, questions emerge about the price tag and strategic rationale for deal.
In its biggest deal ever, the UK pharma giant AstraZeneca agreed to acquire US rare disease specialist Alexion Pharmaceuticals for $39 billion. The cash-and-stock transaction comes with a whopping 45% premium for the latter's shares before the deal was closed, valuing Alexion's shares at $175. Expected to close in the third quarter of 2021, the transaction will result in Alexion's shareholders owning 15% of the combined entity. The deal has also topped Gilead Sciences' $21 billion acquisition of Immunomedics which was thought to be biopharma industry's largest transaction for 2020.
However, the news of the transaction where not well received by the market, with the pharma giant's share price dropping to a nine-month low on Monday as investors questioned the deal's strategic rationale and the hefty premium paid. On the contrary, Alexion's shares jumped 30% on the same day. While Alexion has long been seen as a hot acquisition prospect for the industry, investors are not convinced it is a fit for AstraZeneca which has positioned oncology at the center of its turnaround. In addition, with the pharma giant's relative cash shortage, the acquisition also raised concerns of bad timing.