Will Pfizer  launch another bid for AstraZeneca (LSE: AZN) (NYSE: AZN.US)?
The six-month cooling off period following Pfizer’s previous offer ends today, 26 November, meaning that a new offer could come at any moment, if Pfizer is still interested.
Is an offer possible?
Recent changes to US tax rules aimed at preventing so-called tax inversion deals — where companies use a takeover to move their tax domicile out of the US — were thought to have caused the failure of the AbbVie-Shire deal last month.
The same rules are also expected to make AstraZeneca less attractive to Pfizer, as the potential tax savings from the deal would be lower than previously.
Pfizer has started to look elsewhere for new opportunities, and recently agreed a deal to share information on cutting-edge cancer treatments with Merck, in return for an $850m payment and up to $2bn of future payments.
The medicines concerned are direct competitors to some of those in AstraZeneca’s pipeline, suggesting that the two deals couldn’t co-exist — although Pfizer might be willing to write off the Merck investment in order to secure the much bigger prize of AstraZeneca.
Star fund manager Neil Woodford, whose fund is one of AstraZeneca’s biggest shareholders, said recently on his firm’s website that he believes there is a 50:50 chance of another bid from Pfizer. However, according to the FT, many senior City figures believe the true chances are lower — perhaps 10-20%.
Could Pfizer bid more?
Pfizer’s previous offer was for £55 per AstraZeneca share. When it rejected this offer, AstraZeneca’s board indicated that it would have accepted an offer of £58.85.
Since then, AstraZeneca has worked hard to promote the future value of its pipeline. The British firm’s share price has risen by around 8% over the last six months, and sales have also been unexpectedly strong, rising by 5% during the third quarter.
As a result, I wouldn’t expect AstraZeneca’s board to consider anything less than £58.85 per share, a price tag that Pfizer has already rejected once this year.
I’d say no
Pfizer has probably lost the opportunity to make major tax savings, and would have to increase its previous best offer to have any chance of persuading AstraZeneca’s management to talk seriously.
In my view, a new offer is unlikely, and although AstraZeneca shares remain a reasonable buy thanks to their 3.8% yield, I believe that buying them in hope of a new bid would be unwise.