Will Pfizer return to bid for AstraZeneca ?

New Delhi, August 23, 2014 – Shares in drugmaker AstraZeneca have climbed more than 7 percent this week, fueled by speculation of renewed takeover interest from Pfizer, following an abortive $118 billion (71 billion pounds) takeover attempt in May.

But while British takeover rules mean deal talks could be back on the cards as early as Aug. 26, following the ending of the first of a two-stage cooling-off period, many investors and analysts see the year-end as a more likely time for any return.

“I’m not expecting anything next week,” said Dan Mahony, a fund manager at Polar Capital, who increased his stake in AstraZeneca last year. “I know the stock is rallying on anticipation but I suspect if anything is going to happen it is more likely to happen in November or December.”

Pfizer Chief Executive Ian Read has made clear he is still considering big deals to revive his firm’s pipeline and cut its tax bill – something buying AstraZeneca would allow it to do via a so-called inversion that would shift its tax base to Britain.

However, Read has little leverage right now. Pfizer cannot take the initiative and launch a public bid until Nov. 26 – six months from when it walked away after AstraZeneca rejected its last offer – though AstraZeneca can invite it back from Aug. 26.

British rules also allow Pfizer to make a single offer via a private phone call to AstraZeneca. But this single offer option is rarely used in takeover situations as the bidder has no way to take things further if the target simply says “no”.

As a result, Pfizer would need to make a knockout offer at a big premium to its last bid of 55 pounds a share, which many analysts view as unlikely given Read’s reluctance to close the gap in May to the 58.85 pounds AstraZeneca indicated it wanted. Reuters