Astra–Zeneca Merger

Abstract

In 1999, Zeneca and Astra merged to form a new company called AstraZeneca. The merger deal was valued at $67 billion. It was billed as one of the largest ever European mergers at the time of the deal. The deal made UK-based Zeneca and Sweden-based Astra the fourth largest drug company in the world with $14 billion in sales. Under the terms of the deal, Zeneca shareholders received 53.5% of the new company, while Astra shareholders received 46.5% of the new company. The merger was intended to build the scale to match the global leaders like GlaxoWellcome and Merck. Zeneca made the leading hypertension drug Zestril. Astra possessed the world’s best-selling prescription drug for ulcer – Prilosec. The two companies were market leaders in anticancer drugs and anesthetics. Astra and Zeneca had highly complementary product portfolios as well as sales and marketing organizations. At the time of the deal, AstraZeneca deal was the largest drug merger in Europe which surpassed the $28 billion combination of Ciba–Geigy and Sandoz to form Novartis in the year 1996. The merger improved operating efficiencies by eliminating duplicate infrastructure through better asset utilization and effective exploitation of economies of scale. The new AstraZeneca focused on five therapeutic areas of gastrointestinal, cardiovascular, respiratory, oncology, and anesthesia. The return analysis for AstraZeneca was done for 1 year which included the period of merger announcement to post-merger period (January 12, 1998–January 12, 1999). The cumulative return for the entire period of analysis was 10.20%.