The British drug maker announced this morning that Pfizer chairman Ian Read contacted his AstraZeneca counterpart Leif Johansson on 26 April to propose the companies enter deal talks, and announce the fact to the market. Read was turned down though as AstraZeneca said it was not appropriate to engage in discussions with Pfizer without a specific and attractive proposal being made.
The company has not dismissed the possibility of entering deal talks should an attractive enough proposal be made however.
AstraZeneca also confirmed it had held an exploratory meeting with Pfizer on 5 January 2014 in New York. In the meeting Pfizer had tabled a proposal of £13.98 in cash and 1.758 Pfizer shares for each AstraZeneca share, which would have equated to £46.61 per share. That significantly undervalued the company in Johansson’s view however.
One analyst following the situation found Pfizer taking another swing at AstraZeneca surprising. “We are somewhat surprised that Pfizer has returned with an offer, especially given the company’s previously stated strategy of realising value by getting smaller,” said James Hay of Brewin Dolphin. “While there are clearly some operational overlaps, we do not see AstraZeneca as being the best candidate for Pfizer to pursue a strategy of getting larger before getting smaller – although the previously mentioned financial rationales may be more compelling than we had previously estimated,” he added.
Hay said he expects a very generous premium would be required to nail down a deal and it could be step to far for the US company. “We see £52-£56 to be the level at which management would consider selling to Pfizer but do not expect Pfizer to make such an offer," he said.
If an offer does materialise at that level it would mean many investors who bought in when AstraZeneca was troubled could cash out for a big profit. “I have held AstraZeneca in the income funds for a long time, when I bought the stock in 2009 market sentiment was very negative around the company and the valuation was consequently very low,” said AstraZeneca shareholder Michael Clark, a portfolio manager at Fidelity. “The shares have risen to £46.70, our average purchase price was £29,” he added.
Major shareholders in AstraZeneca include Legal & General Investment Management, Scottish Widows, BlackRock, Invesco Asset Management, Capital Research & Management Co, Wellington Management, Schroder Investment Management and the Vanguard Group.
