Pfizer Inc. (PFE)'s 69.4 billion-pound ($117 billion) pursuit of British drugmaker AstraZeneca Plc (AZN) is likely to fail because U.K. takeover law prohibits the U.S. firm from sweetening its offer after declaring it final, according to people familiar with the transaction. AstraZeneca's board has rejected the improved proposal valued at 55 pounds a share and has no plans to change that stance, said the people with knowledge of the situation. Pfizer can't increase that amount under U.K. takeover rules for now, so the deal is at a stalemate, said the people, who asked not to be identified because the talks are private. Pfizer said in a statement May 18 that it raised its offer to 55 pounds a share and that the "improved proposal is final and cannot be increased." AstraZeneca turned it down yesterday, saying the bid failed to account for the value of the U.K. company's pipeline of experimental medicines and presented risks for shareholders. Related: AstraZeneca Chairman ‘Surprised' Pfizer Took Offer Public Pfizer is expected to announce that it will not make a formal bid by May 26, which is the deadline for the U.S. company to make an official offer, one of the people said. After that date, Pfizer will be blocked from another takeover push for six months, though it can approach the U.K. company privately after just three months to discuss ending the bid moratorium if the target company approves, the people said. AstraZeneca Holders Some analysts speculated that Pfizer may find a way to get the deal done. The U.S. firm may be able to raise its price and "our desk doesn't think it's over," according to an e-mailed report from Mark Schoenebaum, an analyst with ISI Group LLC in New York. He cited the differences between a proposal and an offer and the influence of AstraZeneca shareholders and called Pfizer's bid "effectively a hostile tender offer." Pfizer still hopes that AstraZeneca shareholders will put pressure on the U.K. drugmaker so that they could still get a deal done, one of the people familiar with the situation said. The only exemptions for Pfizer to increase its 55-pound bid, based on its announcement as well as Takeover Panel rules, would be if a third party makes a competitive offer; or, if AstraZeneca's board changes its mind and recommends the current price, Pfizer reserves the right to subsequently increase the bid at any time, Pfizer said late yesterday. Adding Cash Pfizer could add cash or shares to its offer in the event that its stock price or the dollar-pound exchange rate changes to decrease the value of the latest offer. Even then, Pfizer could only restore the value to 55 pounds a share, the drugmaker said. "Pfizer has also made statements in the final proposal announcement which reserve Pfizer's right to introduce other forms of consideration, vary the mix of consideration and reduce its proposal in certain circumstances," the company said. The Takeover Panel, the world's oldest acquisition oversight body, introduced tougher rules in 2011, a year after the hostile acquisition of chocolate maker Cadbury Plc by Kraft Foods Group Inc. sent Cadbury shares on a roller-coaster ride. The regulations are meant to strengthen the hand of target companies and protect shareholders by discouraging so-called virtual bids that send stocks on a speculative tear, the Takeover Panel has said. Deal's Fate AstraZeneca's rejection could end a 5-month pursuit that would've created the world's biggest drugmaker. AstraZeneca shares yesterday plunged the most in about 12 years in London trading, and today fell 2.2 percent to 41.92 pounds at 8:30 a.m., giving the company a market value of about 52.9 billion pounds. Pfizer gained less than 1 percent to $29.28 at the close in New York yesterday. With a deal, Pfizer would transfer its headquarters to the U.K to gain a lower tax rate, add new cancer drugs to its pipeline and take advantage of cost reductions from overlapping operations. Pfizer said the cash-and-stock offer would be its last under the current process, and it won't go directly to AstraZeneca shareholders with a hostile bid. AstraZeneca said yesterday the price would have to be at least 58.85 pounds for the board to be able to recommend it to shareholders. "Pfizer defined its last offer as final in a statement," Esra Erkal-Paler, a spokeswoman for AstraZeneca, said in a telephone interview. "Our understanding of the U.K. takeover rules is that final means final." Joan Campion, a spokeswoman for Pfizer, said in an e-mailed statement that the fate of the deal is now in the hands of AstraZeneca's shareholders. "Our final proposal represents compelling and full value for AstraZeneca shareholders," she said. Source : Bloomberg
