Pfizer declares end to AstraZeneca bid…for now

Pfizer has officially declared its £69 billion bid to acquire AstraZeneca dead – but hasn’t ruled out another attempt in a few months’ time.

The US company has been in open pursuit of AstraZeneca since 28 April, but saw its numerous ‘friendly bids’ rebuffed by the firm, which said the final offer undervalued the company.

Pfizer’s takeover bid has generated huge controversy, and its failure is a huge blow for the US firm, which has grown through a succession of ‘megamergers’ over the years.

The merger would have been the biggest ever involving a UK company, and one of the biggest ever in pharma. Many aspects of the proposed deal generated controversy, but it was Pfizer’s track record of mega-mergers followed by swingeing job cuts, and its plans to redomicile to the UK for tax reasons which caused the greatest opposition.

Pfizer failed to foresee the huge concerns its move created among unions, the scientific research community, and among politicians in the UK, concerns which helped AstraZeneca fight the bid, claiming it would be more productive and profitable by remaining independent.

After having seen its final £69 billion or £55 per share offer rejected out of hand last Sunday, Pfizer has found itself with little room for further manoeuvre within UK takeover rules, and this offer expired yesterday at 5pm local time.

This is the much talked about ‘put up or shut up’ deadline, and Pfizer must now make no further approaches to AstraZeneca for at least six months.

However this ‘cooling off’ period could be shortened if AstraZeneca were to invite Pfizer to the negotiating table.

This could still be possible, as many of AstraZeneca’s shareholders have expressed dissatisfaction with its refusal to hold talks with Pfizer. Fund managers BlackRock is one such shareholder group, which has urged AZ to engage with Pfizer – but these calls are not unanimous, with other shareholders such as Neil Woodford backing AZ’s go-it-alone strategy.

Never say never

Ian Read, chairman and chief executive of Pfizer announced the end of its offer yesterday: “We continue to believe that our final proposal was compelling and represented full value for AstraZeneca based on the information that was available to us. As we said from the start, the pursuit of this transaction was a potential enhancement to our existing strategy.”

While these remarks seem to suggest that the deal is now dead, and that Pfizer will not return for a fresh bid, the company has not explicitly ruled it out.

Read added: “We will continue our focus on the execution of our plans, bringing forth new treatments to meet patients’ needs and remaining responsible stewards of our shareholders’ capital.”

There are other options open to Pfizer if it decides not to maintain its pursuit of AstraZeneca. Already discussed is its plan to split up its divisions into separate units, which is likely to produce greater profits for shareholders.

Leif Johansson, chairman of AstraZeneca, commented on the news: “We note Pfizer’s confirmation that it no longer intends to make an offer for AstraZeneca. We welcome the opportunity to continue building on the momentum we have already demonstrated as an independent company.”

While it has managed to repel Pfizer’s advances, AstraZeneca must now deliver on the rapid turnaround in its business which it has promised to shareholders in the last few weeks.

The company has forecast that it will more than double its current revenues to $45 billion by 2023, with the growth phase beginning in 2017. It also expects its core earnings will grow at an even faster rate over the same period, as it restructures and cuts costs.

If it fails to hit this trajectory, some shareholders will not be slow in calling for a major merger along the lines of the Pfizer offer.

Johansson added that AstraZeneca’s board was grateful to chief executive Pascal Soriot and his management team and employees for their “dedication and focus over a period of uncertainty.”

He concluded: “AstraZeneca has a culture of innovation, with science at the heart of everything we do. I believe this will create significant value for our shareholders, employees and patients who will benefit from our life-changing medicines.”

Johansson and Soriot will be held to this pledge over the coming months, and it is unlikely the Pfizer bid will disappear entirely from the agenda of shareholders any time soon.


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