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 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.
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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)
(Additional reporting by Michele Gershberg in New York and Chris
Vellacott and Jemima Kelly in London; Editing by Eric Walsh, David
Holmes and Alastair Macdonald)
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