Sat, May 03, 2014 - Page 15 News List

Pfizer’s US$106bn bid for rival gains no purchase

Reuters, LONDON

US drugmaker Pfizer Inc yesterday increased its offer for AstraZeneca PLC to £63 billion (US$106 billion), but the British company promptly rejected the proposal, which would create the world’s biggest pharmaceuticals company.

AstraZeneca’s board said the offer “substantially undervalues” the company.

Industry analysts said that raised the possibility that Pfizer would now take the takeover plan, which would boost its pipeline of cancer drugs and create significant tax and cost savings, directly to AstraZeneca shareholders.

The US group would much prefer an agreed deal, since hostile takeovers typically take longer, require a higher final price and carry more risks because the bidder cannot access the target’s books to assess its business.

Yesterday’s £50-per-share offer follows AstraZeneca’s rejection of a proposal that valued it at £58.8 billion, or £46.61 per share.

Some investors and analysts had expected that the sweetened offer would be enough to bring AstraZeneca’s board to the negotiating table, even if it was not accepted, and the swift rejection suggests Pfizer may now go over the board’s head.

“I think it’s making it increasingly likely that Pfizer is going to come back with a hostile bid,” Edison Investment Research analyst Mick Cooper said.

Leading investors met with Pfizer chief executive Ian Read this week in London and many feel that an offer of said £50 or above per share is worth discussing.

“Given where the shares have come from, this doesn’t look unreasonable,” one top-10 AstraZeneca investor said.

AstraZeneca shares were trading at around £30 a year ago, but confidence in the company’s cancer drug pipeline has built up strongly since then.

“We expect Pfizer ultimately to have to sweeten its offer based on discussions we have had with investors, many citing a price within the £52 to £55 range and some above this, and our analysis of the EPS accretion for Pfizer,” said Mark Clark, an analyst at Deutsche Bank.

Many analysts are convinced Pfizer will raise its offer again, not least because it wants to get the deal done before any possible change in US tax rules that might prevent it from moving its tax base to the UK.

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