Many, including me, breathed a sigh of relief when Pfizer‘s final bid for AstraZenenca (LSE: AZN) (NYSE: AZN.US) was knocked back and the American predator walked away — at least for the time being.
Pfizer had made a final offer of £55 per share, valuing the FTSE drugs giant at £70bn. But with the resurgence in confidence at the firm under the leadership of Pascal Soriot, the board shrugged it off as a significant undervaluation.
Punters who had piled in to try to make a quick profit were disappointed — but those who value jobs and a long-term commitment to pharmaceuticals research, rather than the feared asset-stripping and tax-minimisation attempts, were cheered.
It might not be over
But that cheer might not last.
Pfizer’s chief finance officer Frank D’Amelio said on Wednesday that it was only the price that killed the deal, telling Bloomberg that “Any other issues that were raised during negotiations and conversations I think we were able to adequately, effectively address those“.
That sparked fresh rumours of a new bid in the future, and the AstraZenenca price has spiked up 2.4% to 4,452p since Mr D’Amelio’s words were reported.
The UK’s takeover rules mean that Pfizer cannot make a new approach until November at the earliest, although new talks could start as early as August. Mr D’Amelio could apparently not be drawn on whether that was going to happen, but there is clearly still a lot of money riding on the hope of an eventual takeover.
Price still up
The AstraZenenca share price, while down from peak highs of more than £48, is still significantly up from its pre-bid levels of around £38.
Now, that might be because the market has decided that the company was genuinely undervalued and the big institutional investors have piled in for the long term. But although many share the AstraZenenca board’s conviction that the firm will be back to earnings growth through investment in a rejuvenated drugs pipeline, there will still be a few years of falls.
And long-term commitment is generally not how the City’s view works, especially as the shares are now on a forward P/E approaching 18 — which has dropped the predicted dividend yield to 3.9%. No, the big investors rarely look beyond their next annual accounts and short-term profits.
There’s surely still a lot of money invested in the takeover game.
Will it happen?
Will a new bid materialise? My guess is yes — though it’s hard to see how one could succeed without a significantly raised offer, if price really was the only thing that killed off the last one.
