Here’s why the ResApp share price is rocketing 50% today

ResApp shares are breaking out today following an improved acquisition offer from Pfizer Australia.

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A young man wearing glasses and a denim shirt sits at his desk and raises his fists and screams with delight as he watches the ResApp share price go 50% higher today

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Key points

  • ResApp shares surge 50% on the back of a revised scheme consideration from Pfizer Australia
  • The global pharmaceutical giant increased its offer to 20.7 cents per ResApp share 
  • ResApp has to meet certain conditions for the takeover to proceed 

The ResApp Health Ltd (ASX: RAP) share price is by far one of the best performers on the ASX today.

This comes as the company provided an update on its proposed acquisition by Pfizer Inc (NYSE: PFE), with trading resuming immediately after the announcement.

The global biopharmaceutical giant is proposing a takeover of ResApp via its wholly-owned subsidiary Pfizer Australia Holdings Pty Limited.

At the time of writing, the digital health company’s shares are up 50% to a new 52-week high of 17 cents.

In contrast, the All Ordinaries Index (ASX: XAO) is heavily down by 4.2% to 6,842 points.

What’s driving ResApp shares to a 52-week high?

ResApp’s voluntary suspension in trading was lifted immediately following the company’s latest release.

In its statement to the ASX, ResApp advised that Pfizer Australia has agreed to increase the scheme consideration.

Originally, Pfizer Australia offered to acquire 100% of ResApp’s issued capital for 11.5 cents per share in cash.

However, in a draft report provided to the ResApp board in late May, BDO Corporate Finance said the shares were worth between 14.6 cents and 27.7 cents, with a preferred value of 20.7 cents per share.

Given the initial proposal was substantially lower than the expert’s advice, Pfizer Australia revised its offer after negotiations with ResApp.

As such, Pfizer Australia matched the preferred value of 20.7 cents per ResApp share, totalling $180 million. This represents a 130% premium on the last closing ResApp share price of 9 cents on 8 April.

For the deal to proceed at the proposed offer, ResApp’s COVID-19 algorithm study must satisfy certain readout results. Currently, the COVID-19 cough-based detection tool is being trialled across United States study recruitment sites.

Should ResApp fail to meet the data confirmatory study results, Pfizer Australia’s scheme will be offered at 14.6 cents apiece.

Nonetheless, the ResApp board unanimously recommended that ResApp shareholders vote in favour of the revised scheme at the scheme meeting. This is expected to be held in early to mid-August.

The results of the ResApp confirmatory study and independent statistician review are due on or around 20 June.

Management commentary

ResApp CEO and managing director, Tony Keating said:

The ResApp Board is pleased to announce the renegotiated agreement with Pfizer which represents a material increase in the consideration to be received.

The Board believes this offer provides an attractive premium to the undisturbed ResApp share price, reduces the risk for shareholders by providing certainty through an all-cash offer, while also valuing the upside potential of these COVID-19 results.

ResApp share price snapshot

ResApp shares have surged by more than 240% over the past 12 months.

Year to date, the company’s shares are up by almost 160%.

ResApp presides a market capitalisation of roughly $94.51 million. It has approximately 859.2 million shares outstanding.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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