Recently the US drugmaker Pfizer raised its offer for AstraZeneca to 63 billion pounds, but the British company promptly rejected the proposal, which would create the world’s biggest pharmaceuticals company. Pfizer’s pursuit of AstraZeneca, which would boost the American company’s pipeline of cancer drugs, cut its tax bill and create significant cost savings, comes amid a wave of deal-making in the healthcare sector.
AstraZeneca’s board said it had ‘no hesitation’ in rejecting the proposals, which it believed ‘substantially undervalue’ the company and were not an adequate basis on which to engage with its suitor.
The US group would much prefer an agreed deal with its rival, 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. “Given where the shares have come from, this doesn’t look unreasonable,” said one fund manager whose institution is among the 10 biggest investors in AstraZeneca.
“We expect Pfizer ultimately to have to sweeten its offer based on discussions we have had with investors, many citing a price within the 52-55 pounds range and some above this, and our analysis of the EPS accretion for Pfizer,” said Mark Clark, an analyst at Deutsche Bank.
After the initial 46.61 pounds approach, made in January, was disclosed earlier this week, AstraZeneca said that offer fell ‘very significantly’ short and the small cash component would leave investors exposed to the risks faced by Pfizer in executing an ambitious mega-merger.
Some 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 moving its tax base to Britain.