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AstraZeneca rejects Pfizer’s ‘final offer’

Published on 19/05/14 at 08:35am
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AstraZeneca has this morning rejected a new bid from Pfizer that could have seen the US giant pay £69 billion ($118 billion) to create the world’s largest pharmaceutical company.

Pfizer upped its offer last night to £55 per share, plus an increase in the cash component as a proportion of the total consideration from 33% to around 45 per cent.

The new offer, which has been widely expected, represents a 15% premium over the current value of a cash-and-share approach made on May 2 – worth £50 a share at the time – which was also rejected by AstraZeneca.

AstraZeneca’s chairman Leif Johansson spent just nine hours deliberating on the latest bid, before saying his board could only recommend a bid that was at least 10% above an offer of 53.50 pounds made by Pfizer on Friday, or £58.85.

In addition to the ‘inadequate price’, Johansson also slammed the ‘lack of industrial logic’ behind Pfizer’s move.

“Pfizer’s approach throughout its pursuit of AstraZeneca appears to have been fundamentally driven by the corporate financial benefits to its shareholders of cost savings and tax minimization,” Johansson said.

“From our first meeting in January to our latest discussion yesterday, and in the numerous phone calls in between, Pfizer has failed to make a compelling strategic, business or value case.”

Pfizer had said that its improved offer of £55 per share was ‘final’ and would not be increased.

Pfizer has however promised not to mount a hostile takeover. But time is running out: the US giant has only until 26 May for further discussions; otherwise it will have to walk away from the deal under British M&A rules.

It could not make a new bid for another six months. 

Pfizer wants to create the world’s largest drugs company, with a headquarters in New York but a tax base in Britain, where corporate tax rates are lower than in the US; analysts believe the company could save $800 million a year by basing itself in the UK.

The potential deal has met with much opposition from AstraZeneca, as well as many politicians, the British public, unions and scientists, who fear cuts to jobs and research.

“Pfizer’s chances are going down despite its offer of a higher price,” Erik Gordon, professor at the University of Michigan’s Ross School of Business, tells Reuters. “The deal looks less likely today than it looked 10 days ago.”

‘Compelling deal’

Ian Read, chairman and chief executive of Pfizer, says: “We believe our proposal is compelling for AstraZeneca’s shareholders and that a Pfizer-AstraZeneca combination is in the best interests of all stakeholders. We are excited at the opportunity to create a scientific powerhouse, delivering great benefits to patients and science in the UK and across the globe.

“We stand by our unprecedented commitments to the UK Government. We believe that the benefits to all stakeholders can only be maximised through cooperative engagement between both companies.”

He adds that his firm has ‘tried repeatedly’ to engage in a ‘constructive process’ with AstraZeneca to explore a combination of our two companies.

“Following a conversation with AstraZeneca earlier today, we do not believe that the AstraZeneca board is currently prepared to recommend a deal at a reasonable price.”

He says Pfizer remains ready to engage in a ‘meaningful dialogue’ but time for constructive engagement is ‘running out’.

“We have said from the beginning that we will remain disciplined in the price we are willing to pay and we will not depart from that guiding principle. We believe that our proposal represents compelling and full value for AstraZeneca and that other issues that have been raised by AstraZeneca do not represent material difficulties.”

Of the two companies’ research and development workforce, Pfizer has said it will retain at least 20% in the UK for at least five years, and base its European HQ in Britain.

But this has still been seen as not enough by the UK government, who are said to want longer-term promises on R&D, and have the commitment extended from five to ten years.

Ben Adams

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