Pfizer ends bid for AstraZeneca

Typically long holiday weekends are good for deals with bankers canceling vacations and company boards on conference calls. But that wasn’t the case this Memorial Day for Pfizer, which ended its takeover attempt of AstraZeneca.

The New York Times had this story by Jenny Anderson:

Pfizer confirmed on Monday that it had ended its audacious bid to buy AstraZeneca, Britain’s second-largest pharmaceutical company.

In a statement, the company said it “does not intend to make an offer for AstraZeneca” in the wake of the rejection of what Pfizer called its final offer earlier this month. The cash-and-stock offer, which valued AstraZeneca at about $119 billion, would have created the world’s largest drug company.

Pfizer had indicated that it would not pursue a hostile bid, which would allow AstraZeneca’s shareholders to vote on the deal without the approval of AstraZeneca’s board. Under British takeover rules, Pfizer cannot come back with another offer for AstraZeneca for six months. The earliest it could offer a higher price would be in three months, if AstraZeneca’s board agreed to the talks.

Jonathan D. Rockoff, Hester Plumridge and Dana Cimilluca said in a Wall Street Journal story that the company was unclear on whether it would seek another bid in the future:

Pfizer had been chasing AstraZeneca since November in an effort to create the world’s biggest pharmaceutical company. Pfizer last proposed a deal valued at $120 billion. But AstraZeneca was able to run out the clock on Monday’s deadline under U.K. takeover rules for reaching an agreement. Under those rules, Pfizer could submit another offer for AstraZeneca in six months.

Pfizer Chairman and Chief Executive Ian Read didn’t rule out resuming discussions with AstraZeneca but said Pfizer was going to focus on “lots of great opportunities” for growth inside the company and to look at other potential deals.

“We are now moving on. We have no idea whether we’d be interested in AstraZeneca at any point in the future,” Mr. Read said in an interview.

AstraZeneca Chairman Leif Johansson reiterated the company’s belief in its own growth prospects and especially, its “rapidly progressing pipeline” of experimental drugs. “We welcome the opportunity to continue building on the momentum we have already demonstrated as an independent company,” he said in a written statement.

Their separate paths will be thorny. Each company will need to win approval for promising—but risky—drugs in development. The companies also will probably look for other deal-making opportunities, which Pfizer’s failed pursuit of AstraZeneca showed aren’t sure bets.

AstraZeneca is expected to move quickly to examine strategic and other moves that could help keep its stock elevated and protect it from another unwanted approach.

The Reuters story by Ben Hirschler and Bill Berkrot  said any future deal would depend on what shareholders think of the companies’ future prospects:

AstraZeneca Chairman Leif Johansson welcomed Pfizer’s decision to back down, which he said would allow the British company to focus on its growth potential as an independent company.

What happens next will depend upon whether AstraZeneca’s share price deteriorates in the coming weeks and how hard its shareholders push for it to revisit a deal with Pfizer.

BlackRock, AstraZeneca’s biggest shareholder, backed the board’s rejection of Pfizer’s 55 pounds a share offer, but urged it to talk again in the future.

The proposed transaction ran into fierce opposition from politicians in Britain, Sweden – where AstraZeneca has half it roots – and the United States over the likelihood that the marriage would lead to thousands of job cuts.

Ultimately, it was price and the lack of room for eleventh-hour maneuvering by Pfizer that killed the deal.

The Associated Press story, via the Washington Post, said the retreat could be temporary as Pfizer works to continue to grow:

“For Pfizer, this now puts them in a position where they went out there to become the super pharmaceutical company in one fell swoop, and now that’s not going to happen,” said Steve Brozak, president of WBB Securities. “Now the question becomes, do they look for another target or rethink their strategy?”

Pfizer’s decision is likely just a temporary strategic retreat, said Erik Gordon, a professor at University of Michigan’s Ross School of Business.

That’s because Pfizer still needs to strengthen its new product pipeline and also minimize the high U.S. taxes it pays on overseas income — two goals an AstraZeneca acquisition could help fulfill.

Gordon expects that Pfizer’s next move will be to push the institutional investors who own large blocks of AstraZeneca shares to help persuade the company’s board to open up deal talks with Pfizer after 90 days and share more details on its slate of potential new drugs that could justify a higher offer.

“I’d be surprised if AstraZeneca doesn’t hear from Pfizer again,” he said.

Pfizer slipped from the world’s largest drugmaker to No. 2 last year, behind Novartis AG, mainly because Lipitor got generic competition at the end of 2011, wiping out several billion dollars in annual sales.

Pfizer also has sold off a couple parts of its business and reorganized as part of preparations to possibly break off another part of the company, something analysts have been urging it to do.

No matter what happens, the crumbling deal is a blow to Pfizer as it tries to continue to grow in a market where getting drugs to market is increasingly difficult. Shareholders of both companies may also revolt and sell shares now that a merger is no longer in the picture. Either way, it means a much smaller payday for the bankers and lawyers working on the deal. But if waiting commands a higher price, then everyone could come out ahead.