Pfizer-AstraZeneca deal still not over
Pfizer–AstraZeneca deal seemed to be off on Monday morning with Pfizer calling their bid over nearly £70 billion their “final” offer. It seems Wall Street haven’t heard the fat lady sing yet and believe a potential deal could be revived.
Mark Schoenbaum from ISI Group in New York, said “the deal is wounded, but perhaps not dead.” Morningstar analyst Damien Conover in Chicago said the odds of an AstraZeneca purchase had fallen well below the 50 percent mark.
Some of the AstraZeneca shareholders have also expressed their disappointment of the company not willing to do Business with the largest U.S drug maker Pfizer. This could put some pressure on the AstraZeneca board to reconsider any future offer. Due to UK takeover rules Pfizer will be unable to come back with a new offer for another 6 months.
AstraZeneca management had indicated any offer below £58.85 per share undervalued the company. Hence the take it or leave it offer of £55 per share being rejected, Pfizer said it would walk away rather than go directly to shareholders in a hostile takeover manoeuvre.
“It seems like Pfizer was very adamant about wanting to do the deal. The latest salvo of discussion suggests the chances have declined, but they’re not zero,” said Les Funtleyder, author of “Healthcare Investing” and a consulting partner in U.K.-based Bluecloud Healthcare consulting firm.
If the deal goes ahead it would create the world’s largest drug maker
One of the main reasons why Pfizer are aiming to acquire AstraZeneca and not other targets is due to the UK’s lower corporation tax, which Pfizer could take advantage of if they moved to Britain. Pfizer Chief Executive Officer Ian Read has signalled the company won’t consider large U.S. drug maker acquisitions, given the comparatively high tax rates.
In making the case that Pfizer has undervalued the company, CEO Pascal Soriot said that AstraZeneca have been promoting its own products. Pascal also forecast revenue growing above $45 billion by 2023. This claim has been dismissed by Raghuram Selvaraju, healthcare equity research analyst with Aegis Capital in New York. He says that Soriot could say whatever he wants about projections but everyone knows these projections are wrong.
For tax-inversion purposes, GlaxoSmithKline with a market cap of $132 billion was the only comparable target, according to Selvaraju. “GlaxoSmithKline is nowhere near as weak as AstraZeneca,” he said. “It almost has to be (AstraZeneca) or Pfizer goes back to playing the waiting game.”
I suppose time will tell whether Pfizer do come back with another offer or AstraZeneca will carry on doing their thing.