Sunday, 18 May 2014

Fancy that - Pfizer is apparently preparing to sweeten its offer for Astra

Interesting to see most of the financial media (The Sunday Times, Wall Street Journal, the Financial Times and Mark Kleinman over at Sky News) reporting today Pfizer is preparing to sweeten its offer for AstraZeneca to about £55.00 a share.

I'm sure I alluded to something very similar happening on Tip TV last Thursday. Here is a link to the clip: http://www.tiptv.co.uk/archives/tip-tv-highlight-ben-harrington-15-05-14/

UPDATE: Pfizer has just released its raised takeover offer for AstraZeneca of £55.00 a share or £70 billion. Great timing - I'm sure all the hacks working the Sunday shift on the British daily papers will really appreciate you issuing a statement at almost 10:00 pm on a Sunday night. I have pasted Pfizer's statement below:


This is an announcement of a possible offer falling under Rule 2.4 of the City Code on Takeovers and Mergers (the “Code”). It does not represent a firm intention to make an offer under Rule 2.7 of the Code. Accordingly, there can be no certainty that any offer will ultimately be made even if the pre-conditions referred to below are satisfied or waived.

·    Improved proposal is final and cannot be increased [1]
·    AstraZeneca shareholders would receive, for each AstraZeneca share, 1.747 shares in the combined entity and 2,476 pence in cash, representing an indicative value of £55.00[2]
·    Substantial increase of approximately 15% over the current value of Pfizer's 2 May proposal
·    Cash consideration increased by £8.78 per AstraZeneca share, or approximately £11.3billion[3] ($19.0 billion[4])
·    Cash component increased as a proportion of the total consideration fromapproximately 33% to 45%
·    Pfizer will not make a hostile offer directly to AstraZeneca shareholders and will only proceed with an offer with the recommendation of the AstraZeneca board[5]
·    Pfizer calls on supportive AstraZeneca shareholders to urge the AstraZeneca board to begin substantive engagement with Pfizer and extend the period for such talks prior to the26 May deadline for making an offer

Pfizer Inc. today announces its final proposal to combine the two companies. This is the fourth proposal Pfizer has made and Pfizer believes that this final proposal provides a clear basis for AstraZeneca to extend the period for making a firm offer under the Code and to meaningfully engage with Pfizer. 

On 16 May 2014, Pfizer sent a letter to the Chairman of AstraZeneca setting forth the terms and basis of an improved proposal with an indicative value of £53.50, comprising 1.845 shares in the combined entity and 2,157 pence per AstraZeneca share. In response, AstraZeneca indicated that its board believes that Pfizer's £53.50 proposal substantially undervalues the company.  During discussions earlier today, AstraZeneca made clear that it is not currently prepared to accept a price close to Pfizer’s £53.50 proposal.  An edited copy of the 16 May letter will be filed with the SEC and is attached as an Appendix to this announcement.

Pfizer confirms that it will not make a hostile offer directly to AstraZeneca shareholders and will only proceed with an offer with the recommendation of the board of directors of AstraZeneca[6].

Final Proposal

Under the terms of the final proposal AstraZeneca shareholders would receive, for each AstraZeneca share, 1.747 shares in the combined entity and 2,476 pence in cash, representing an indicative value of £55.00 ($92.53) per share[7]. This proposal is final and will not be increased, except in the circumstances set out below. Relative to Pfizer’s 2 May proposal, the final proposal represents:

·         an increase of the cash consideration of £8.78 per share, or £11.3 billion[8];
·         an increase in the cash component as a proportion of the total consideration from33% to approximately 45%;
·         a substantial increase in current indicative value of approximately 15%;
·    an aggregate increase in the total current indicative value of approximately £9.1billion or $15.3 billion[9].

Under the final proposal, Pfizer and AstraZeneca shareholders would own approximately 74% and 26%, respectively, of the combined company.[10]

On the basis of Pfizer’s closing share price of $29.12 on 16 May 2014 and an exchange rate of $1.00:£0.5944 on 16 May 2014, the proposal represents a premium of approximately:

·    45% to the unaffected closing price of an AstraZeneca share of £37.82 on 17 April 2014 (being the date before market speculation of a possible offer by Pfizer for AstraZeneca);
·    53% to the closing price of an AstraZeneca share of £35.86 on 3 January 2014, being the trading day immediately prior to the date of Pfizer’s January proposal;
·    24% to the current value of Pfizer’s January proposal; and
·    34% to AstraZeneca’s all time high closing price (prior to 17 April 2014) of £41.03 per AstraZeneca share since formation of the company in 1999.

In the absence of further discussions or an extension of the deadline for making a firm offer under the Code, Pfizer's proposal will expire at 5:00 p.m. London time on 26 May. Pfizer is asking AstraZeneca shareholders to urge the AstraZeneca board to immediately begin meaningful engagement with Pfizer following the talks on 18 May 2014, and extend the period for negotiating a possible transaction.

Commenting on the proposal, Ian Read, Chairman and CEO of Pfizer, said:

We believe our proposal is compelling for AstraZeneca's shareholders and that a Pfizer-AstraZeneca combination is in the best interests of all stakeholders. We are excited at the opportunity to create a scientific powerhouse, delivering great benefits to patients and science in the UK and across the globe. We stand by our unprecedented commitments to the UK Government.  We believe that the benefits to all stakeholders can only be maximised through cooperative engagement between both companies.

We have tried repeatedly to engage in a constructive process with AstraZeneca to explore a combination of our two companies. Following a conversation with AstraZeneca earlier today, we do not believe that the AstraZeneca board is currently prepared to recommend a deal at a reasonable price. We remain ready to engage in a meaningful dialogue but time for constructive engagement is running out. We have said from the beginning that we will remain disciplined in the price we are willing to pay and we will not depart from that guiding principle. We believe that our proposal represents compelling and full value for AstraZeneca and that other issues that have been raised by AstraZeneca do not represent material difficulties.

Other Matters

The making of any firm offer by Pfizer would be subject to the following pre-conditions (the first and third of which may be waived in whole or in part by Pfizer):
·    satisfactory completion of a customary due diligence review by Pfizer;
·    recommendation of the board of directors of AstraZeneca to the making of a firm offer by Pfizer; and
·    the directors of AstraZeneca giving irrevocable undertakings to accept any offer in respect of their AstraZeneca shares on terms reasonably satisfactory to Pfizer.

Pfizer reserves the right to introduce other forms of consideration and/or vary the mix of consideration and waive in whole or in part the first and the third of the pre-conditions to making an offer referred to above. There can be no certainty that any offer will ultimately be made even if the pre-conditions referred to above are satisfied or waived, in whole or in part.

Pfizer reserves the right to make an offer for AstraZeneca at any time, at less than, for each AstraZeneca share, 1.747 shares in the combined entity and 2,476 pence in cash:
·    with the agreement or recommendation of the AstraZeneca board;
·    if a third party announces a firm intention to make an offer for AstraZeneca pursuant to Rule 2.7 of the Code which, at the date Pfizer announces a firm intention to make an offer for AstraZeneca, is valued at a lower price than contemplated by the terms of the proposal;
·    following the announcement by AstraZeneca of a whitewash transaction[11]pursuant to the Code; or
·    in the event that any AstraZeneca dividend is declared, made or paid in excess of what is expected by the consensus analyst forecasted dividends of 53.5 pence[12] per share due to be announced by AstraZeneca on 31 July 2014 (in which case a £ for £ adjustment reduction equal to the excess amount would be made).

Pfizer reserves the right to make an offer for AstraZeneca at any time, at more than, for each AstraZeneca share, 1.747 shares in the combined entity and 2,476 pence in cash:
·         following the release of a firm offer announcement pursuant to Rule 2.7 of the Code;
·         if the indicative value of such offer, when made, would not equal £55.00; or
·         if a third party announces a firm intention to make an offer for AstraZeneca pursuant to Rule 2.7 of the Code which, at the date Pfizer announces a firm intention to make an offer for AstraZeneca, is valued at a higher price than contemplated by the terms of the proposal.


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