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AstraZeneca Rejects Pfizer's Take-It-Or-Leave-It Offer

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[May 19, 2014]  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.

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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.

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