Speculation Mounts That Pfizer (PFE) Will Up Bid For AstraZeneca PLC (AZN) As Cooling Off Period Ends
Senior bankers and industry figures canvassed by the Financial Times (FT) say the chances AstraZeneca remains a potential target for larger drugmaker Pfizer, despite a recent crackdown on tax inversion deals, are around 10 to 20 percent, the Financial Times reported this week.
British activist fund manager Neil Woodford has also remained bullish on a Pfizer/AstraZeneca marriage, saying last month he believes Pfizer will tender a new offer by the end of November, after the United Kingdom Takeover Panel’s “cooling off” period has expired Wednesday. He told the FT he gives the chances of the deal 50/50 odds.
AstraZeneca ultimately rejected Pfizer’s final bid of 55 pounds per share because it felt its experimental drug company made it a valuable standalone entity. Pfizer had planned to move its headquarters to Ireland as part of the deal, hoping to capitalize on lucrative tax loopholes that have since been closed.
Still, even without the tax breaks, Wall Street has been rife with speculation that Pfizer will return for another bite at the apple after its U.K. takeover “cool down” period expires on Nov. 26. Soriot would not comment on whether AstraZeneca would entertain new offers, but he did say that investors may expect “continued news flow over the next several months” which could push its share price even higher.
“The $2.85 billion deal with Merck KGaA on a very early-stage immuno-oncology pact. Its $850 million upfront quickly vaulted to the top of the list of all-time upfront payments in a development deal, and represents both Pfizer’s need to significantly improve its pipeline as well as its appetite for doing things in a big way,” wrote the Financial Times on Tuesday, a day ahead of the cooling off period’s expiration.
The British drugmakers already snubbed an earlier Pfizer offer for the company at £55-per-share, saying in May that the bid substantially undervalued “the company and its attractive prospects.”
Still, hopes for a deal remain widespread on Wall Street.
Analysts with investment bank Jefferies said that any potential merger with Pfizer would see significant upside for AstraZeneca shareholders, because they could wind up controlling around 40 percent of the eventual entity.
“Given that Pfizer would likely have to return with a bid of at least £58.85 per share to initiate negotiations, this implies positive upside asymmetry against what we believe would be a worst case unaffected share price of circa £40 if it were clear that there was no chance Pfizer would return,” they wrote in a note to investors.
Both the group of 66 polled investment analysts questioned by the FT and consensus among the Analyst Ratings Network have advised investor to hold their positions in AstraZeneca for now.
AstraZeneca is feeling pretty smug after its share price has climbed as high as the original offer larger rival Pfizer Inc. had said it would pay for the company in a buyout last May, the firm’s chief executive said today.
Chief Executive Officer Pascal Soriot told reporters on a conference call during earnings reports last month that AstraZeneca’s closing price of $73.54 (46.20 pounds) was roughly the amount Pfizer offered the company’s board when they first discussed a merger last January. At the time, the price was considered a premium and many analysts thought AstraZeneca was hasty in walking away.
Now, a year later, after one of the most bullish market climates in biotech history, AstraZeneca has shown it can create value without exiting to potential suitors, said Soriot.
“The original price was 46 pounds and it was meant to be a premium,” Soriot said. “Hopefully that shows the value we can make implementing our independent strategy.”