"AstraZeneca Needs to Speak Up for Increased Bid", According to ISI

ISI analyst Mark Schoenebaum says Pfizer's PFE final offer is in AstraZeneca shareholder's hands, calling it "effectively a 'hostile' tender offer."

On Sunday, Pfizer announced a fourth and final proposal of $92.53, or £55 per share. The press release states, "This proposal is final and will not be increased, except in the circumstances set out below. Relative to Pfizer's 2 May proposal, the final proposal represents:

• an increase of the cash consideration of £8.78 per share, or £11.3 billion8;
• an increase in the cash component as a proportion of the total consideration from 33% to approximately 45%;
• a substantial increase in current indicative value of approximately 15%;
• an aggregate increase in the total current indicative value of approximately £9.1 billion or $15.3 billion9."

Early Monday morning, AstraZeneca rejected Pfizer's fourth offer of £55 per share following months of proposals. An AstraZeneca chairman said that he spoke with Pfizer for more than one hour on the phone on Sunday before Pfizer ended discussions.

Pfizer was prepared to offer £53.50 on Friday, before AstraZeneca remarked that the price should be at least 10 percent higher to value the company at around £74 billion. AstraZeneca chairman, Leif Johansson, said that the £55 per share valuation fell short.

In an email, ISI analyst Schoenebaum clarified, "While PFE certainly has the financial ability to raise the price ~10%, this would mean - based on consensus AZN estimates - that PFE is creating very little (if any) NPV for its shareholders. However, PFE may have a very different view of AZN's out year prospects than consensus does - if so, PFE's internal "NPV breakeven" price might be materially higher than ~$92.5 + 10%. However, for PFE to increase its bid, AZN shareholders probably need to speak up and force the board into a negotiation with PFE."

The 28 day negotiating period governed by the United Kingdom's Takeover Code ends in May 26, unless both companies mutually request an extension. Reuters reported that AstraZeneca sees no prospect of the Pfizer deal before May 26.

Shares of AstraZeneca have traded as low as $70.35 on Monday, down more than 14 percent, following the company's board rejection of the final $119 billion takeover offer.