AstraZeneca (LSE: AZN) (NYSE: AZN.US) shares have climbed 8% over the past week to 4,442p, fuelled by speculation that a fresh takeover bid from Pfizer in the US could soon be launched.
Pfizer’s earlier bid was finally withdrawn in late May after the AstraZeneca board gave the idea the coldest of shoulders.
But Pfizer was keen to get its hands on London’s second-biggest pharmaceuticals firm for two reasons.
Drugs and taxes
Firstly, Pfizer needs to seriously boost its pipeline, and even after such a short time in its refocus plan, AstraZeneca is already seeing results. At the first-half stage this year, there were 14 projects in Phase III, up from 8 a year previously, moving chief executive Pascal Soriot to say “we now have one of the most exciting pipelines in the industry“. That number is now up to 15.
Pfizer also wants to minimize taxes, and one way would be to acquire a company like AstraZeneca and shift its tax base to the UK.
Takeover regulations
UK takeover regulations usually mandate a minimum six-month waiting period before a fresh approach can be made — taking us to 26 November. But there are exceptions, and a takeover target can invite the bidder back after three months. That would seem unlikely, but there is one further option — a bidder can make a single bid if it is confident the target will accept it for recommendation to shareholders.
Few are actually expecting anything as early as this week — most are suggesting any new approach would not happen until November or December.
It’s far from certain there will be a new bid anyway, after Pfizer wouldn’t raise its £55 offer in May — that valued AstraZeneca at £70bn, taking it ahead of rival GlaxoSmithKline. At the time, the AstraZeneca board said they’d only look at offers of at least £58.85.
Receding target?
Some investors were miffed at not making a quick profit last time. But a key member of the opposition was Neil Woodford, who reckoned shareholders would do better in the long term by telling Pfizer where to stick its offer.
And we’ll be looking at the results of six more months of pipeline development at AstraZeneca, which will surely only increase the price at which a takeover is likely to succeed — pushing it even further than Pfizer might be willing to pay right now.
Sights elsewhere?
Pfizer might also seek an overseas tax base elsewhere, and come commentators are already suggesting other takeover targets.
Whatever happens, the next few months could be a tense time for AstraZeneca shareholders.