So the attempted takeover of AstraZeneca (LSE: AZN) (NYSE: AZN.US) by Pfizer is dead and buried, is it?
Well, it certainly seemed that way a day ago, but some institutional investors who are still sniffing after quick profits are urging the company’s board to reconsider their stance and invite the predator back to the table.
Quick cash?
On Wednesday it was Schroders who was nagging AstraZenenca boss Pascal Soriot and his team, and since then we’ve heard that AXA Investment Managers and Legal & General are jumping on the bandwagon, too. A nice bag of takeover cash would do quite a bit to make their investment portfolio performances look good come next annual reporting time, but there’s far more at stake than that.
Pfizer’s last offer of £55 per share put a P/E valuation on AstraZeneca of around 22 based on forecasts for the year ending December 2014, and that might look superficially attractive. But in the middle of a restructuring period in which it was expected that earnings would fall for a few years, that’s a very shortsighted valuation.
The true worth of AstraZeneca, of which Pfizer is certainly aware, is the eventual value of its newly-boosted drugs pipeline. And with 90 projects having reached clinical phases of development and with a good number approaching the final phases, the potential is looking very nice indeed. Five to ten years from now, we should be seeing earnings a lot higher than those 2014 forecasts, and the Pfizer offer will appear derisory.
The good guys
Thankfully, not all investors are looking for short-term gains.
Neil Woodford, now running his own Woodford Investment Management after a market-beating stint at Invesco Perpetual, and a major AstraZeneca shareholder, has said that he “will make more money for my investors by AstraZeneca remaining independent“. Mr Woodford, of course, has a Buffet-like long-term approach, which sets him aside from the herd of institutional investors. He was also instrumental in getting Mr Soriot in as the new boss, and he’ll want to see the fruits of those efforts.
So far the AstraZeneca board appears unswayed by the “Sell” chorus, and Mr Soriot seems committed to the long term and to finish what he started — if only all our companies were run that way!
Volatile shares
AstraZeneca shares perked up again midweek to reach £44.59 as the flurry of recrimination started, but the apparent steadfastness of the board is shaking out the get-rich-quick merchants and the price dropped back to £44.20 by close. It’s down further to £42.49 as I write today.
With a bit of luck, AstraZenenca should be safe.
