Pfizer expected to be patient in face of AstraZeneca rejection

May 03 2014, 17:45 IST
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Pfizer Inc has already had its takeover overtures rebuffed three times by rival AstraZeneca Plc. Reuters Pfizer Inc has already had its takeover overtures rebuffed three times by rival AstraZeneca Plc. Reuters
SummaryInvestors and analysts say Pfizer needs to raise its offer as high as 52 to 55 pounds per share.

Pfizer Inc has already had its takeover overtures rebuffed three times by rival AstraZeneca Plc, but investors in the U.S. drugmaker say it can tolerate a little more rejection before going hostile with the deal.

AstraZeneca turned down a sweetened Pfizer cash and stock offer on Friday that amounted to 63 billion pounds ($106 billion), or about 50 pounds per share, saying it substantially undervalued the British drugmaker. The raised offer followed unsolicited Pfizer approaches in late April and January.

Investors and analysts say Pfizer needs to raise its offer as high as 52 to 55 pounds per share to close the deal, as well as increase the cash portion to as much as 50 percent from around 30 percent.

While several analysts and shareholders said Pfizer needs to do a deal of this sort to restore its fading competitive edge, those who talked to Reuters did not believe Chief Executive Ian Read was likely to go over the heads of AstraZeneca management and directly to shareholders quickly. He may even walk away if a friendly deal can't be done.

"I don't think Ian will take that route," said Brian Turner, healthcare analyst for Levin Capital, which holds more than 11 million Pfizer shares.

"I think he believes he can get the deal done," added Turner, who knows Read personally. "If he's told he's not coming in at a price that's sort of equitable for both parties, at the end of the day he'll just go away."

The 60-year-old Read, a Scot who grew up in what was then Rhodesia (now Zimbabwe), has spent his entire career at Pfizer. An accountant by trade, Read joined Pfizer in 1978 as an auditor and rose through the ranks to become head of global pharmaceuticals in 2006. He was called upon to take over in December of 2010, when predecessor Jeffrey Kindler suddenly retired.

Bill Smead, Chief Executive of Smead Capital Management, which holds almost 90,000 Pfizer shares, expects a measured approach and higher offers.

"There's hostile, there's friendly and then there's just patience," he said.

"I think they will walk away if it doesn't work out, but there's nothing we're seeing ... that wouldn't indicate that this is just the normal process that ends with marriage. You're probably one or two offers away from that."

Under British takeover rules, Pfizer has until May 26 to declare its firm intention of making a bid, or walking away.

COMPLICATIONS TO GOING HOSTILE

A purchase of AstraZeneca

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