The Top Line

May 23, 2014 6:45 pm

A quick guide to put Pfizer top of the Takeover Panel’s class

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Study tips for US group’s pursuit of AstraZeneca

After a five-month pursuit of AstraZeneca, Pfizer’s bid this week all but fell apart when the UK drugmaker rejected the US group’s final £69.4bn offer, with blame attributed equally between Pfizer boss Ian Read, his investment bankers at Bank of America Merrill Lynch, JPMorgan and Guggenheim Partners, and his PR guru Sir Alan Parker.

Team Pfizer clearly did not do enough studying, misreading the political sentiment and miscalculating the price they needed to pay to seal the deal. They now have three months to revise before they can try again. With some shareholders rooting for them, they could pass the resit with flying colours. To help them prepare, the Financial Times has devised a quick study guide.

What is the colour of the UK’s takeover manual?
a) Rainbow coloured as befits the mellow nature of the Takeover Panel
b) Blue
c) There is a manual? Why do we not have one of those?

You want to buy the crown jewel of British science. Your opening cash and shares offer of £46.61 is rejected with AstraZeneca claiming it “very significantly undervalued” the company. Do you:
a) Shout at your bankers
b) Gauge the force of the rejection and sweeten the offer by 10 to 15 per cent
c) Disclose the bid publicly without telling Astra and say you are “confident a consummation is capable of being consummated” then raise the bid by just less than 10 per cent

You hike your bid to £50 and publicly disclose the offer. AstraZeneca says the proposal substantially undervalues the company and is not a basis on which to engage talks. Do you:

a) Shout at your bankers

b) Interpret the forceful wording of the rejection as deal code for bumping the price by 15-25 per cent

c) Misread the strength of the rejection and the sentiment of shareholders and raise your offer by only 7 per cent

There is now a political storm over the deal in Britain, with widespread criticism that the deal is purely about tax advantages. You are being summoned before a parliamentary committee to explain your strategy. Do you:

a) Shout at your bankers

b) Remember the political backlash three years ago against the takeover of Cadbury by US food group Kraft which led to the UK Takeover Panel rules being tightened

c) Extol the virtues of the deal, claiming it is a “win-win” for society, then say it will mean job losses and big cuts in R&D

The target says they will not accept anything less than £58.85, 10 per cent higher than your previous offer of £53.50. Do you:

a) Shout at your bankers

b) Bid 10 per cent higher

c) Bid 2.8 per cent more at £55 a share, declare the bid “final” and unwittingly constrain yourself from increasing the price under UK takeover rules, then throw a public tantrum claiming there is nothing more you can do

You cause widespread market confusion by issuing a “final” offer with the caveat that you might increase it, even though you are not allowed to under takeover rules. Do you:

a) Shout at your bankers and ask for another copy of the takeover manual

b) Withdraw from the bidding process.

c) Say you reserve the right to clarify this clarification and issue further unclear statements up to the May 26 deadline

If you scored:

Mostly As: Have you considered a job at a pharmacy?

Mostly Bs: With a few smart tweaks to the offer, you could bag the prize.

Mostly Cs: You are Pfizer. Will you come back and make the same mistakes in three months time?

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