Will Pfizer launch another bid for AstraZeneca (LSE: AZN) (NYSE: AZN.US)?
The six-month cooling off period following Pfizers 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 AstraZenecas pipeline, suggesting that the two deals couldnt 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 AstraZenecas biggestshareholders, said recently on his firms 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?
Pfizers previous offer was for 55 per AstraZeneca share. When it rejected this offer, AstraZenecas 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 firms 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 wouldnt expect AstraZenecas board to consider anything less than 58.85 per share, a price tag that Pfizer has already rejected once this year.
Id 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 AstraZenecas 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.
Buying a share on takeover hopes is always risky, but one FTSE 100 pharmaceutical firm was recently selected for “5 Shares To Retire On“, the Motley Fool’s latest wealth report.
I can’t reveal here whether the firm concerned was AstraZeneca or one of its FTSE 100 rivals, but I can say that the five blue chip names featured in this report currently offer an average yield of more than 4%.
You can find out more by downloading this FREE, no-obligation report today.
Availability is limited, however — so click here now to receive your copy immediately.
Roland Head has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
