An analyst from a Deutsche Bank stated that Pharmaceutical company Pfizer Inc. (NYSE:PFE), would reap a lot of benefits if it were to acquire its rival firm, GlaxoSmithKline plc (ADR) (NYSE:GSK).
The New York-based analyst who goes by the name Gregg Gilbert said that the acquisition would bring Pfizer a lot of financial benefits. He also said that such an acquisition would give Pfizer access to Glaxo’s balance sheet and thus allow it to change its tax situation towards its favor.
Despite his impressive analysis, Pfizer Inc. (NYSE:PFE) has not made any announcements about acquiring Glaxo, and neither has it expressed any interest to do so. However, it is too early to make any final inferences regarding the subject. Pfizer’s CEO, Ian Read has already shown signs that he is in search of deals that can raise his company’s sales margins.
In 2014, the company dropped its $117 billion bid to purchase a pharmaceutical firm called AstraZeneca which is based in London. The abandoned deal would have gone in the history books as the company’s biggest acquisition. When confronted with Gilbert’s analysis, GlaxoSmithKline’s spokesman Simon Steel declined to make any statement.
In his report, Gilbert stated that they have established Pfizer’s need to generate value by harnessing the power of its balance sheet to perform minor deals. He justified his suggestion by pointing out that the media had previously thought about the impact of a marriage between the two companies.
Citigroup’s analyst, Andrew Baum opposed Gilbert’s observation. In one of his statements, he said that Pfizer indeed has the capacity and the finances to invest in Glaxo, but the move would be met with a lot of resistance from the government. He cited that it is in the government’s interest to maintain Glaxo as an independently listed firm given that it is the biggest pharmaceutical company in the U.K.
GlaxoSmithKline plc (ADR) (NYSE:GSK) on the other hand has been experiencing some hard times as its shares drops. The firm has been experiencing a poor growth rate amidst increased competition from rival firms.
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