Britain’s AstraZeneca yesterday rejected a sweetened and “final” offer from Pfizer, casting serious doubt on the US drugmaker’s plan for a merger to create the world’s biggest pharmaceuticals group.
The rebuff came nine hours after Pfizer said on Sunday it had raised its takeover offer to £55 a share, or around £69 billion in total, and would walk away if AstraZeneca did not accept it.
Shares in AstraZeneca tumbled 13 per cent to £42 in early trade as prospects of a takeover ebbed away.
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. It has met entrenched opposition from AstraZeneca, as well as many politicians and scientists who fear cuts to jobs and research.
“Pfizer’s chances are going down despite its offer of a higher price,” said Erik Gordon, professor at the University of Michigan’s Ross School of Business. “The deal looks less likely today than it looked 10 days ago.”
AstraZeneca chairman Leif Johansson said he had made clear in discussions with Pfizer that his board could only recommend a bid that was at least 10 per cent above an offer of £53.50 made by Pfizer on Friday, or £58.85.
In addition to the inadequate price, Johansson also slammed the lack industrial logic behind Pfizer’s move; the risks posed to shareholders by the controversial tax plans; and the threat to life science jobs in Britain, Sweden and the US.
“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 minimisation,” 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’s proposed takeover would be the largest-ever foreign acquisition of a British company and is opposed by many scientists and politicians who fear it would undermine Britain’s science base.
Analyst Tim Anderson at brokerage Bernstein said shares in both companies were likely to be hit if the potential deal falls through.
The US group said its new offer was final and could not be increased. It said it would not make a hostile offer directly to AstraZeneca shareholders and would only proceed with an offer with the recommendation of the AstraZeneca board.
Pfizer also increased the cash element in its offer to 45 per cent, under which AstraZeneca shareholders would get 1.747 shares in the enlarged company for each of their AstraZeneca shares and £24.76 in cash.
The new offer represents a 15 per cent 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 swiftly rejected by AstraZeneca.
Pfizer chief executive Ian Read said he believed his company’s proposal was “compelling” for AstraZeneca shareholders and expressed frustration at its refusal to engage in talks, urging the British company’s shareholders to pressure its board to start discussions.
“We do not believe that the AstraZeneca board is currently prepared to recommend a deal at a reasonable price,” Read said. “We remain ready to engage in a meaningful dialogue but time for constructive engagement is running out.”
In the absence of further discussions or an extension of the deadline for making a firm offer under British takeover rules, Pfizer’s proposal will expire on May 26. After that, it would have to wait six months before returning.
Investors have backed AstraZeneca in rejecting £50 a share, but several have said they would want it to engage in discussions if Pfizer came back with an improved offer.
They fear AstraZeneca shares will tumble if Pfizer walks away.