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I have avoided writing about the on-again, off-again takeover of AstraZeneca (LSE:AZN) by Pfizer (NYSE:PFE) simply because it has been on-gain, off-again. As of just a few minutes ago Pfizer released news and details of what it says is its final offer to AstraZeneca. In short, if this deal happens, it will be one of the largest acquisitions ever and the largest in the history of the UK.
The Guardian said yesterday (Saturday, 17 May) that “Winning over the UK’s scientists – particularly [Sir Paul] Nurse, widely regarded as the most influential – is vital if Pfizer is going to succeed in gaining public and political support for a takeover before a City deadline on 26 May.”
The problem is that Nurse said that the deal “could produce real benefits and open doors all over the world. If, on the other hand, they are doing it for short-term share price gains and to cut R&D, it can’t be good for anybody.” In an attempt to prevent the job loss that typically follows acquisitions of this type, Nurse insisted the Pfizer head Ian Read make some commitments that were stronger and longer lasting than what had been offered thus far.
The Final Offer
Pfizer has responded with an offer of £55.00 ($92.53) per share in the form of 1.747 shares and £24.76 per AstraZeneca share for a total offering price of £69 billion ($118.00). This is the fourth offer that Pfizer has put on the table since January this year, and it should quell some of the AZN rebuffs that Pfizer has been undervaluing it. This offer replaces one that stood at £53.50 per share that was unacceptable to AstraZeneca.
The offer represents a
- 24% premium on the AZN shares over the original offer at current value
- 34% premium on AZN’s highest closing price prior to 17 April 2014, which was £41.03
- 45% premium on the closing AZN share price as at 17 April 2014
- 53% premium on the closing AZN share price as at 03 January 2014
What the Players Really Think
The value of the deal with respect to both the offer and the future of the new company will be the ultimate determining factor in AstraZeneca’s response. So, here’s the latest on what the heads of the two companies are thinking.
Pfizer’s Ian Read: “We believe our proposal is compelling for AstraZeneca’s shareholders and that a Pfizer-AstraZeneca combination is in the best interests of all stakeholders. we do not believe that the AstraZeneca board is currently prepared to recommend a deal at a reasonable price. We remain ready to engage in a meaningful dialogue but time for constructive engagement is running out. We have said from the beginning that we will remain disciplined in the price we are willing to pay and we will not depart from that guiding principle. We believe that our proposal represents compelling and full value for AstraZeneca and that other issues that have been raised by AstraZeneca do not represent material difficulties.”
AstraZeneca’s Nurse (To Read): “We don’t trust you.” (To the press) “Read has been nothing but evasive. There’s nothing that hasn’t been conditional. I haven’t heard anything to make me believe he is prepared to make long-term commitments, and without those there is a risk they might just strip it.”
Pfizer said that it will not engage in an hostile takeover bid, so it is pretty much up to AstraZeneca at this point. The thing that makes it interesting is that Nurse also said that, “I could imagine it being quite a good deal if they are really serious about investing in the business.” It is quite apparent that he does not believe that they are.
On the other hand, you never know what a billion here or a billion can do to turn heads.
