Pfizer has a risky way back into a deal with AstraZeneca. An apparent loophole in Britain’s takeover code means the U.S. pharma group could offer the 58.85 pounds-a-share demanded by Astra for a recommendation, even after declaring that the earlier 55 pounds-a-share pitch was “final.”
The possibility is flagged in a clarification statement issued by Pfizer on May 19. It said that if Astra’s board decided to recommend the current proposal, and Pfizer then turned that proposal into a full-blown recommended offer, the U.S. group “reserved the right subsequently to increase its offer at any time.”
Technically, then, Pfizer could signal to Astra’s board that the recommendation to accept a 55 pounds-a-share offer would be immediately followed by a revised offer at 58.85 pounds-a-share. The Astra board would have to take the risk of looking ridiculous if no higher bid materialised, but the Anglo-Swedish group could always withdraw the initial recommendation.
This technique of redefining “final” is certainly cunning. It is also probably too clever by half for the Takeover Panel, which sets the rules for British deals.
The panel would point out that a board’s recommendation of an offer should be genuine, but Astra’s would be merely a ruse to get around the spirit of the rule. Also, the tactic would be unfair to investors who have made trading decisions based on the understanding that the rules prohibit Pfizer from making a higher offer – agreed or otherwise – for at least three months.
Pfizer is not saying that it wishes to go down this route. Still, if both sets of shareholders wanted a deal, the Takeover Panel could come under huge pressure to approve it.
In such circumstances, the panel should – and doubtless would – resist. It is supposed to consider the interests of the whole market, which is more important than the desires of any particular bidder or target. When a company says it will not raise an offer, investors need to be able to believe it.