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UK Takeover Code Is Confusing

|Includes: AZN, Pfizer Inc. (PFE)

Pfizer's unsuccessful proposal to acquire AstraZeneca has drawn the focus toward the UK's so-called "Takeover Code", which you can print out here and use as bathroom reading…or clean-up, depending on how you feel about it.

The rules surrounding the acquisition of British companies were updated in 2011 due to the 2010 hostile takeover of Cadbury by Kraft Foods. The takeover lasted months and put Cadbury's shares through the ringer. The Takeover Panel says that the rules in place now are meant to keep target companies from suffering an extended siege from hostile acquirers along with making things more transparent.

But the problem is that, in this case, the rules are making the waters muddier than before.

When Pfizer announced this week that they wouldn't be making a formal bid for AstraZeneca, which would supposedly rule them out from doing so for six months, news came that there are actually a couple of different scenarios that would make it possible for Pfizer to make a bid before November.

The first is that Pfizer can make a single knockout offer that AstraZeneca would actually be able to recommend to its shareholders. If that is rejected, Pfizer would need to wait the full six months before making a different approach. The other alternative is that AstraZeneca can invite Pfizer to renew discussions after only three months.

What this means is that the drama isn't over and undoubtedly neither is the rollercoaster for AstraZeneca. Their stock went down just a little bit after the news came out, but it will no doubt continue to be bolstered over the next few months by speculation that talks could be rekindled earlier than six months.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.