News

AstraZeneca rejects Pfizer’s takeover offer

AstraZeneca rejects Pfizer’s takeover offer

AstraZeneca CEO Pascal Soriot leaves the British Parliament's Business Innovation and Skills Committee after a hearing in central London, Tuesday, May 13, 2014. British lawmakers questioned Pfizer CEO Ian Read and AstraZeneca CEO Pascal Soriot to guarantee jobs should Pfizer succeed in taking over AstraZeneca. Photo: Associated Press/Lefteris Pitarakis

By Ben Hirschler

LONDON (Reuters) – Britain’s AstraZeneca on Monday rejected a sweetened and “final” offer from Pfizer, undermining the U.S. 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 pounds a share, or around 70 billion pounds ($118 billion) in total, and would walk away if AstraZeneca did not accept it.

Shares in AstraZeneca tumbled 13 percent to 42 pounds by late morning as prospects of a takeover ebbed away. Some major shareholders expressed annoyance at the board’s stance.

Pfizer wants to create the world’s largest drugs firm, with a headquarters in New York but a tax base in Britain, where corporate tax rates are lower than in the United States. The plan has met entrenched opposition from AstraZeneca, as well as politicians and scientists who fear cuts to jobs and research.

“It died of multiple wounds. Too little cash, too many suspicions about Pfizer’s motives, and too little confidence in its assurances about jobs,” said Erik Gordon, professor at the University of Michigan’s Ross School of Business. “Pfizer’s chances are going down, despite its offer of a higher price.”

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 percent above an offer of 53.50 pounds made by Pfizer on Friday, or 58.85 pounds.

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 United States.

“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.”

Johansson’s refusal to engage in discussions angered some shareholders, with one fund manager at a top-10 investor in the group telling Reuters: “We do not think the Astra management have done a good job on behalf of shareholders.

Alastair Gunn of top-30 shareholder Jupiter Fund Management said: “We are disappointed the board of AstraZeneca has rejected Pfizer’s latest offer so categorically. They should have at least engaged in a constructive conversation with Pfizer.”

However, 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.

The U.S. 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 percent, under which AstraZeneca shareholders would get 1.747 shares in the enlarged company for each of their AstraZeneca shares and 24.76 pounds in cash.

The new offer represents a 15-percent premium over the current value of a cash-and-share approach made on May 2 – worth 50 pounds a share at the time – which was also swiftly rejected by AstraZeneca.

Pfizer Chief Executive Ian Read said he believed his proposal was “compelling” for AstraZeneca shareholders and expressed frustration at its refusal to talk, urging the British company’s shareholders to pressure its board to engage.

TAKE A BREAK

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 at 12:00 p.m. ET (1600 GMT) on May 26. After that, it would have to wait six months before making another bid.

“AstraZeneca will have six months to demonstrate that it was right to reject Pfizer’s offer, or face the prospect of a fresh approach,” said analyst Mick Cooper at Edison Investment Research.

While Pfizer would have to wait on the sidelines until November, it would be possible for AstraZeneca to initiate talks in August, if it decided it wants coax a higher offer.

The latest increased offer had been widely expected. Pfizer said last week it would consider a higher offer as it urged AstraZeneca’s board to enter talks.

The British firm has laid out details of its pipeline of new drugs and argues it has no need for a deal.

There has been a mounting political backlash against the proposed deal in Britain, the United States and Sweden, where AstraZeneca has half its roots.

The Swedish government launched a concerted effort on Friday against a merger that it fears will lead to cuts in science jobs and research, echoing concerns aired by British lawmakers at two parliamentary hearings last week, and fears for U.S. jobs in states where AstraZeneca has a large presence.

British Prime Minister David Cameron has said he wanted more assurances from Pfizer, in the event of a takeover, although as the head of the free-market Conservative Party he does not want to be seen to be deterring foreign corporate investment.

Pfizer gave a five-year commitment to complete AstraZeneca’s new research center in Cambridge, retain a factory in northern England and put a fifth of its research staff in Britain, but added that these pledges could be adjusted if circumstances changed “significantly”.

The tax aspects of the deal, meanwhile, have sparked anger in the United States, where lawmakers are now considering legislation to prevent what are known as corporate inversions, under which U.S. companies re-incorporate overseas to avoid U.S. taxes.

Inversions have helped fuel a wave of deals in the pharmaceuticals sector in recent months. Buying AstraZeneca would allow Pfizer to carry out the largest such deal yet.

($1 = 0.5942 British Pounds)

Recent Headlines

in Entertainment, National

Stars join protests over passing of Indiana’s Religious Freedom law

Fresh
George Takei poses for a portrait at Quaker Good Energy Lodge with GenArt and the Collective , during the Sundance Film Festival, on Saturday, Jan. 18, 2014 in Park City, Utah.

Celebrities call for an Indiana boycott after the passing of a controversial law that could lead to discrimination against gay couples.

in National

Senate’s Harry Reid will not seek re-election

Fresh
Senate Minority Leader Harry Reid of Nev. adjusts his glasses as he speaks to reporters on Capitol Hill in Washington, Tuesday, March 24, 2015, following a policy luncheon. Reid is wearing special glasses as part of his recovery from injuries suffered in an exercise accident in January.

Senate Minority Leader Harry Reid says that it would be "inappropriate" for him to seek re-election.

in Sports

Coyotes broadcaster charged with assault in casino fight

Phoenix Coyotes defenseman Nick Boynton warms up before facing the Colorado Avalanche in an NHL hockey game in Denver on Monday, Feb. 4, 2008.

Nick Boynton, an Arizona Coyotes broadcaster and former NHL defensemen, faces charges after biting an officer at a Buffalo casino.

in Sports

Tennessee fires basketball coach Donnie Tyndall

Tennessee head coach Donnie Tyndall responds to a officials call in the second half of an NCAA college basketball game against Vanderbilt on Wednesday, Feb. 11, 2015, in Nashville, Tenn. Tennessee won in overtime 76-73.

Tennessee fires coach Donnie Tyndall after one season, amid an NCAA investigation.

in Sports

Kentucky rolls Mountaineers in the Midwest Regional

Kentucky's Marcus Lee, right, blocks a shot by West Virginia's Jonathan Holton during the first half of a college basketball game in the NCAA men's tournament regional semifinals, Thursday, March 26, 2015, in Cleveland.

Top-seed Kentucky advances after defeating West Virginia 78-39 rout of West Virginia in the Midwest Regional.