The AstraZeneca deal is off? Not if the Wallenbergs get a say

The consensus in the market is that the chances of AstraZeneca, one of the world’s biggest pharmaceutical companies, being bought by an even bigger pharmaceutical company, Pfizer, is dead. But that is far from true because the family which has a big say in the drug company’s future, the Wallenbergs, still want to offload it. The Swedes have good reason to hope that a deal can still be done.

Most people think that when Pfizer are allowed to make another bid for the drug-maker, which under British takeover rules is in November, it won’t bother. The first reason they think this is because what motivated the deal was Pfizer’s desire to move its HQ to Europe to reduce its tax, and since then the US government has tightened its rules about such moves, meaning Pfizer would benefit less. The second reason is that Pfizer just authorised an $11bn share buy-back plan, so it has less money to make acquisitions.

But one important thing just changed at AstraZeneca: it has a new drug approved, which the firm thinks could bring in $2bn a year. That’s good for the bottom line, but it is also a huge boon for CEO, Pascal Soriot, whose strategy is to get the firm’s drug pipeline working smoothly.

And that in turn is good news for the Wallenberg family, the Swedish investing dynasty which is hugely influential at the firm. The family is the firm’s biggest shareholder, its non-executive chairman Leif Johansson is a lifelong Wallenberg family employee – as was his father before him – and its non-executive director is current family head Marcus Wallenberg. They want to sell, and that fact itself makes a deal more likely.

True, AstraZeneca’s share-price is still way below the price Pfizer offered in May and which the Wallenbergs considered too low. But it could rise quickly if a new offer – from Pfizer or someone else – is made. Especially if hedge funds get involved. That is what happened in the Chiquita deal. The banana producer’s shareholders rejected an offer from Fyffes and plumped instead for one from a pair of billionaire Brazilian families to take it private. The families offered more, and the hedge fund shareholders’ desire for a quick buck won out.

It’s a peculiar paradox of the modern economy that long-term goals can be brought to fruition by the most short-termist of investors. If the Wallenbergs put their weight behind a sale, you can’t bet against it happening.