Astra shares rise on speculation of renewed Pfizer bid

AstraZeneca’s stock has been rising for two weeks on growing expectations the British pharmaceutical firm will re-engage in merger negotiations with Pfizer after the partial expiration of a cooling-off period.

Tue, 02 Sep, 2014 - 01:00

The two sides walked away from a £69.5bn (€88bn) deal in May after failing to reach an agreement on price.

Under the UK’s takeover rules, AstraZeneca or Pfizer now can take the first steps toward a renewed deal.

AstraZeneca’s shares have gained 12% since August 15, a move analysts and investors attribute to bets negotiations might be revived.

After being barred for three months, UK regulations allowed the drug companies since last week to restart talks under limited circumstances.

“I’m sure they’re talking privately and would prefer to keep it private, given it didn’t go that well in the public markets last time,” said Jeff Jonas, a portfolio manager at Gabelli Funds, which owns Pfizer stock.

US giant Pfizer’s bid for AstraZeneca was the subject of political scrutiny in the UK and the US.

The UK government sought guarantees that Pfizer would preserve jobs in medical research in Britain, while US lawmakers criticised Pfizer’s proposed move overseas, which would let it avoid some US taxes.

Price was the biggest sticking point when talks collapsed in May. At the time, AstraZeneca told Pfizer that it would need to offer at least £58.85 a share, while Pfizer’s final proposal was £55.

“I do think it’s likely that the deal gets revisited by Pfizer,” said Damien Conover, an analyst at Morningstar, though he expects Pfizer to re-approach AstraZeneca in November, rather than now.

Rebecca McClure, a Pfizer spokeswoman, said the company’s position hasn’t changed since May when it said it didn’t intend to make another offer.

Esra Erkal-Paler, an AstraZeneca spokeswoman, declined to comment on either the share price move or whether management was talking with Pfizer again.

AstraZeneca is not the only potential big deal for Pfizer. The US drugmaker is also reportedly looking at other targets including Dublin-based Actavis.

Actavis spokesman David Belian wasn’t immediately available for comment.

“Actavis would make more sense,” Mr Jonas said. “Pfizer could still do the tax inversion, you’d get a good generics business and they have a good branded business so Pfizer could use that deal to split in two.”