Last month, analysts predicted that Pfizer Inc (NYSE:PFE) had to beat $100 billion if it wanted to get its hands on Britain’s Astrazeneca (ST:AZN). Well, its second proposal was turned down. As of April 30, the markets responded well to Pfizer, as it reigned as one of the S&P 500’s best performers. At that point, AstraZeneca’s U.K.-listed shares had jumped nearly 15% since Pfizer’s interest made headlines.
Now, fast forwarding to PFE’s most recent (third) proposal: On May 19, AZN rejected the $117-billion offer, as well, claiming that it still fell short of the company’s value. That day, the company’s shares fell as much as 15% intraday in London trading.
They say that “third time’s the charm”. Well, I guess in this case, Pfizer is all out of luck.
No Coming Back
What would have merged into the world’s largest drugs company is now nothing more than an evaporating thought. Pfizer has officially given up on buying AZN: no last-minute offers, no nothing.
Just a cooling-off period, required by British rules. At the end of the day, the deal was politically charged: Pfizer was already given the courtesy of a conveniently reduced tax bill. But, you see, the numbers just didn’t add up. Pfizer spent over $250 billion on takeovers (over the past 10 years). Yet, it’s now worth $185 billion. So, AstraZeneca probably kept its shareholders’ best long-term interests in mind, according to CMC’s Michael Hewson.
After this cooling-off period, there’s a slight (and we mean slight) possibility that, after three months, AZN could contact PFE, or vice versa (after six months). AstraZeneca’s shares fell 2% as markets opened this morning. This share drop, coupled with shareholder pushback, could be enough to persuade AZN’s mind over the next three months… Jeremy Batstone-Carr of Charles Stanley argues that it’ll be “a big issue now, I think, for AstraZeneca to convince shareholders that £55 per share was undervaluing their business.”
The Bottom Line
It’s apparent that Pfizer and AstraZeneca wanted different things. While PFE had its eye on many cancer medicines, AZN wanted to focus solely on growth as an independent company. Some say politicians in Britain, the United States and Sweden opposed the transaction, afraid that thousands would lose their jobs.
But in all honesty, the deal fell through because of the bottom-line dollar. AstraZeneca wanted (at minimum) £58 per share. And the £55 offer didn’t cut it.
For now, Swiss firm, Novartis N (NYSE:NVS), reigns as the world’s largest drugmaker – that’s only if AZN refuses to budge in the next three or six months.