Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
So what: Under the terms of the latest deal Pfizer was willing to pay $118.8 billion to purchase AstraZeneca (around $92.50 per share), whereas AstraZeneca's management team was looking for a considerably sweetened bid in the neighborhood of $98 or more per share. According to AstraZeneca's management team the deal would greatly undervalue the company current products and pipeline assets, and it doesn't believe that Pfizer's offer represents what's in the best interests of shareholders. In other words, the same speech shareholders have heard three times now. Pfizer now has until 5pm local time next Monday to make another offer under the U.K.'s takeover rules, otherwise it can't make another offer for AstraZeneca for six months.
Now what: With an offer that represented a 45% premium from whence the bidding began, I believe AstraZeneca's board has stubbornly thrown away what I consider to be a more-than-fair offer. The true value for Pfizer lies in purchasing AstraZeneca and moving its headquarters overseas to reduce it tax liability. That and combining its R&D and SG&A department would result in billions of savings – although it would take a couple of years to realize all those savings. AstraZeneca, though, has a lot of ongoing issues it needs to work through, but none more pressing than its ongoing patent issues. The deal would have made sense from a strategic standpoint, but I had trouble justifying the price following the first bid, let alone a third bid from Pfizer's standpoint. I would personally be surprised to see any competing bids come in, or for Pfizer to make a fourth bid for AstraZeneca. It's quite possible that, as I warned previously, shareholders could see nearly all of their buyout talk gains erode over the coming weeks.
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