Why Jazz Pharmaceuticals Is an Attractive Buyout Candidatehttp://www.fool.com/investing/general/2014/06/18/why-jazz-pharmaceuticals-is-an-attractive-buyout-c.aspx Brian Nichols
June 18, 2014
A tax inversion plan among large U.S. companies has grown evident as they attempt to find lower tax rates and higher profits via relocation into various countries within Europe. Already, Elan, AstraZeneca plc, Alliance Boots, and now Covidien plc have either been attempted or successfully acquired. Yet, the most surprising might be a lack of action surrounding Jazz Pharmaceuticals plc (NASDAQ: JAZZ) -- Why is this biotech being avoided?
The offers come rolling in
AstraZeneca surprisingly rejected the offer despite stagnant growth and concerns of an impending Crestor patent expiration. England's 21% corporate tax rate, which compares favorably to the U.S. tax rate of 35%, was a key driver behind Pfizer's attempt to buy Astra.
However, if you thought a 21% tax rate was good, then check out Ireland where the corporate tax rate is only 12.5%. Over the last weekend news hit of a $40 billion Covidien takeover offer, making it another large attempt at a European company. Unlike AstraZeneca, Covidien does have some anticipated growth, as revenue is expected by analysts to increase in the low-to-mid single digits over the next couple of years.
AstraZeneca and Covidien are two extremely large companies to receive buyout offers, showing a sense of urgency on behalf of large U.S. companies to relocate.
Jazz markets about a dozen products across a variety of industries with annual revenue of $923 million, and analysts are estimating revenue growth of 30% and 20%, respectively, in 2014 and 2015. With a market capitalization of $8.4 billion it would seem the tax benefit alone would be enough to attract a larger pharma company, yet still no offers.
For 2014 Jazz expects revenue of $1.13 billion with its narcolepsy drug Xyrem accounting for around $765 million of that. Its top three drugs are expected to account for nearly 90% of total sales, meaning its remaining drugs have little impact fundamentally.
Why avoid Jazz?