AstraZeneca snubs Pfizer's improved $106 bn takeover

2nd May 2014, Comments 0 comments

British drugs giant AstraZeneca on Friday rejected a sweetened $106-billion takeover bid from US rival Pfizer, hitting out at the "inadequate" offer as it battles to remain independent.

The rejection came hours after Pfizer had lifted its informal cash and shares bid to the equivalent of 76 billion euros, as it seeks to strengthen its research in cancer and slash its tax bill.

The Viagra maker offered £50 ($84, 61 euros) per AstraZeneca share, higher than the previous bid worth a total of $99 billion.

"The financial and other terms described in the (new) proposal are inadequate, substantially undervalue AstraZeneca and are not a basis on which to engage with Pfizer," the British group said in a statement.

Analysts said Pfizer was now likely to come back with a hostile bid, which may still not force through a deal.

"It seems the main driver behind the deal is the desire of Pfizer to shelter $70 billion of its cash pile from US taxation rules, and that doesn't seem a sufficiently good reason to do a deal if you are AstraZeneca," said CMC chief strategist Michael Hewson.

He added: "The Pfizer CEO has talked up the prospects of a deal being good for the creation of new drugs, but AstraZeneca already has a healthy pipeline relative to Pfizer and reducing competition in the pharmaceutical sector seems a funny way to generate growth in new drugs."

AstraZeneca attacked the new bid for offering a "large proportion" payable in Pfizer shares, noting also that the combined firm would still seek to establish its corporate and tax residency in England.

"Accordingly, the board has rejected the proposal," the London-listed firm added.

Pfizer has highlighted the considerable tax advantages from the transaction, which would create a new UK-incorporated holding company.

Outlining his company's defence, AstraZeneca chairman Leif Johansson said it "continues to invest significantly in research, development and manufacturing in the UK, Sweden and the US".

"We are showing strong momentum as an independent company, in particular with our exciting, rapidly progressing pipeline, which the board believes will deliver significant value for shareholders.

"Pfizer's proposal would dramatically dilute AstraZeneca shareholders' exposure to our unique pipeline and would create risks around its delivery. As such, the board has no hesitation in rejecting the proposal."

- 'Compelling logic' -

AstraZeneca shares were flat after the rejection at £48.15 in afternoon deals on London's FTSE 100 index, against a flat broader market.

Earlier Friday, Pfizer chief executive Ian Read said "the industrial logic for a combination between Pfizer and AstraZeneca is compelling".

He added that the combined company would bring together "powerful and world-leading" research expertise in key areas, such as oncology, inflammation and cardiovascular and metabolic disorders.

Read also vowed in a letter to British Prime Minister David Cameron that Pfizer would complete AstraZeneca's proposed research and development facility in Cambridge, southern England, should the deal go ahead.

He added that 20 percent of the new group's research and development staff would be based in Britain.

Read also spoke of the "highly compelling strategic, business and financial rationale for combining" Pfizer with AstraZeneca.

The US group said it would look to locate manufacturing operations in Britain and will keep AstraZeneca's commercial manufacturing facilities in Macclesfield, northwestern England.

Cameron's spokesperson said that the fate of the takeover now was in the hands of the two companies.

"The prime minister has received a letter from the chief executive of Pfizer and today spoke to the chairman of AstraZeneca who set out the board's confidence in AstraZeneca's strategy as an independent company," the spokesperson said.

"The prime minister is clear that the UK government regards the potential takeover bid as a matter for the respective boards and shareholders of the two companies."

- Sector awash with deals -

Pfizer's tilt at AstraZeneca comes as global pharmaceutical giants are forming sector deals worth billions of dollars to cope with lost revenues from patent expirations and the effects of public cuts on health care spending.

The bid for AstraZeneca follows other mega-mergers undertaken by Pfizer, the biggest US drugmaker by revenue. Prior Pfizer takeovers included Warner-Lambert, Pharmacia and Wyeth.

AstraZeneca currently employs more than 50,000 people around the world, including 6,700 in Britain.

Pfizer meanwhile has a global workforce of 70,000 staff, of which 2,500 are in Britain.

© 2014 AFP

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