Pfizer abandons AstraZeneca effort

BY Matt Atkins

US pharmaceutical firm Pfizer has walked away from its efforts to woo British drugmaker AstraZeneca. The American giant threw in the towel shortly before 5pm on Monday 26 May, conceding that its attempts to create the world's largest pharmaceutical firm had failed. 

AstraZeneca has fiercely resisted Pfizer's campaign, which began in November last year. Backed by UK scientists and politicians, the firm's boardroom has knocked back a string of multi-billion pound offers. The UK firm rejected a final offer of £69bn, or £55 per share, saying the proposal undervalued the company and its prospects for growth.

Pfizer's campaign faced many hurdles, being mired in controversy from the off. The bid had stirred public anger on both sides of the Atlantic, after it was revealed tax savings were a key driver of Pfizer's approach. A successful takeover would have given Pfizer the chance to relocate its tax base to the UK, escaping the high rate of US corporation tax.

The US firm had come under intense pressure from the UK government, as well as unions, to spell out Pfizer's commitment to British research and jobs. The firm’ chief executive, Ian Read, spent two days of questioning from MPs on the Commons Business Select Committee and the Science Committee, giving a five-year pledge on UK jobs and facilities. In light of the tax storm surrounding the deal, these guarantees were dismissed as inadequate.

While AstraZeneca’s board can breathe a sigh of relief, the news will come as a disappointment to a number of shareholders who had wanted the firm to engage with Pfizer. Investors including BlackRock, Legal & General, Axa and Schroders made it clear they wanted the company to consider the bid, though other leading investment groups were against it. Many viewed the price per share offered as a few pounds too low. It has been widely reported that a figure above £58 may have swayed the board.

Under UK takeover rules, Pfizer cannot approach AstraZeneca for six months, although the UK firm can choose to initiate talks in three month's time. Mr Read has said the US firm does not rule out future discussions with AstraZeneca, but that it will now focus on "lots of great opportunities" including growth within the company and other potential deals.

News: Pfizer drops AstraZeneca takeover bid

US oil and gas sees mixed Q1

BY Matt Atkins

In the three month period to 31 March, US oil and gas M&A volume activity reached its highest Q1 volume in over a decade, according to PwC US. Deal value was also up on Q1 2013, with a total of 43 oil and gas deals valued greater than $50m, compared to 41 deals the previous year. However, although volume was particularly high for the period, it slipped by 23 percent compared to the 56 deals of the fourth quarter in 2013. Deal value in the first three months also slumped on the fourth quarter, declining 54 percent from $43bn.

Upstream activity

Increased activity in the upstream sector and a growing foreign interest in US oil and gas assets drove activity, according to Doug Maeir, energy sector deals leader at PwC US. “The first three months of 2014 represented a historic first quarter across the board led by deal activity in the upstream sector, including in the Gulf of Mexico and interest from foreign players,” he said. “Divestures continue to be a major source of deal activity, but we are seeing smaller deals taking place; larger portfolio adjustments have already been made. Smaller deals are also happening in the oilfield services sector as a result of companies selectively looking to fill in the white space by adding assets that can increase productivity and reduce costs.”

Unconventional assets

Shale extraction proved a significant driver of transactions, with 17 deals totalling $6.2bn related to shale plays. “First quarter shale deal activity was on par with what we anticipated as we see the continued shift towards unconventionals,” said John Brady, a Houston-based PwC partner. “A third of total deal value was related to shale plays in the first three months of the year, indicating the ongoing attractiveness of capitalising on the long-term prospects for shale gas.

Mega deals down

Master limited partnerships (MLPs) were involved in 11 of the first quarter’s transactions, representing approximately 27 percent of total deal activity. Financial investors continued to show interest in the industry, and were behind two total transactions, totalling $1.9bn. This represents a 230 percent jump in deal value compared to the same time period last year. Bumper deals were down, however, according to PwC. The first three months of 2014 saw five mega deals, representing $10.1bn. This compares to eight mega deals worth $19.7bn during Q1 2013.

Press Release: US Oil & Gas M&A Activity Reaches Highest First Quarter Volume in More than a Decade

Reshaped firms ready for growth, says EY

BY Matt Atkins

Confidence in the global economy has risen considerably in the last year, says an EY report released in April. Just 9 percent of respondents to the firm’s Capital Confidence Barometer expect the economy to decline – the lowest number in the report’s history.

Real optimism

According to the report, executives are optimistic of a real and sustained economic recovery, and recent global megatrends have reshaped their strategies.

Today’s companies continue to grapple with geopolitical instability, a fragile global economic recovery and an emerging activist shareholder class. But while many would expect the pressures and shocks of the past few years to stunt the ambitions of business leaders, rather they have started to factor such trials into their long-term plans.

Credit available

The report reveals that, although credit has been available for some time, executives are now increasingly willing to put it to work in deals. The availability of credit is at its highest level for some time, and credit conditions are stabilising, overall. With a greater appetite for debt, the use of leverage in deal making is expected to rise, and with a hike in interest rates predicted, companies are rushing to secure financing at the current rates.

Quality not quantity

But while the pressure remains on companies to grow, the lessons learned from the financial crisis have led to a laser focus on cost structures and operational efficiency. As a result, a model of growth has emerged which sees firms actively seeking organic growth opportunities within strict parameters of cost management and operational efficiency. EY notes that firms are considering higher risk approaches to such growth, with firms adding to their existing product offerings. In addition, growing optimism that innovation can generate growth has seen R&D efforts almost triple in the last three months.

While M&A deal volumes – presently at record lows – are not expected to grow significantly, large transformational deals will make real headlines. In the past six months, the number of firms planning $5bn-plus acquisitions has doubled – evidence that M&A activity in the near future will concentrate on larger and more strategic deals. Quality, rather than quantity is likely to be the key concern of acquisitive firms in the months to come.

Full report: EY Capital Confidence Barometer April 2014 - October 2014