The board of AstraZeneca PLC has rejected the increased US$119 billion takeover offer from US pharmaceuticals firm Pfizer Inc, a decision that has led to a sharp slide in the UK company’s share price as investors think it effectively brings an end to the protracted and increasingly bitter takeover saga.
In a statement yesterday, AstraZeneca’s board said it “reiterates its confidence in AstraZeneca’s ability to deliver on its prospects as an independent, science-led business.”
Pfizer, the world’s No. 2 drugmaker by revenue, has been pursuing No. 8 AstraZeneca since January, saying that their businesses are complementary and would be stronger together. On Sunday, it said it was ready to raise its stock-and-cash offer by 15 percent to US$118.8 billion, or ￡70.73 billion.
AstraZeneca did not take long to reject the offer, its board saying that Pfizer is making “an opportunistic attempt to acquire a transformed AstraZeneca, without reflecting the value of its exciting pipeline.”
Because Pfizer said it would not raise its offer again or launch a hostile takeover bid over the heads of AstraZeneca’s board, the prospect of a deal looks to be remote, unless AstraZeneca shareholders urge a change of mind. Pfizer has said it hopes AstraZeneca’s shareholders will push for a deal.
Now, AstraZeneca shareholders certainly think a deal is over and the company’s share price slumped 12.9 percent to ￡41.90.
For weeks, Pfizer has sought the board’s approval for what would have been the richest acquisition ever among drugmakers and the third-biggest deal in any industry, according to figures from research firm Dealogic.
It would be Pfizer’s fourth deal worth US$60 billion or more since 2000.
Pfizer’s offer comes amid a surge of other deals as drugmakers look to either grow or eliminate peripheral assets to focus on their strengths. Those deals include Switzerland’s Novartis AG agreeing to buy GlaxoSmithKline PLC’s (GSK) cancer-drug business for up to US$16 billion, to sell most of its vaccines business to GSK for US$7.1 billion, plus royalties, and to sell its animal health division to Eli Lilly and Co of Indianapolis for about US$5.4 billion. Canada’s Valeant Pharmaceuticals has made an unsolicited offer of nearly US$46 billion for Botox maker Allergan, which has turned it down, so far.
Pfizer’s latest offer increased from 33 percent to 45 percent the ratio of cash AstraZeneca shareholders would receive. The latest offer would have given them the equivalent of ￡55 for each AstraZeneca share, split between 1.747 shares of the new company and ￡0.02476 in cash.
It said the offer represented a 45 percent premium to AstraZeneca’s share price of ￡37.82 on April 17, before rumors of the deal began circulating.
Pfizer chief executive Ian Read said in a statement that the combination would yield “great benefits to patients and science in the UK and across the globe.”
AstraZeneca has repeatedly rejected Pfizer’s offers, insisting that they significantly undervalue the company and its portfolio of experimental drugs. The company and British government officials also have raised concerns about the prospect of job cuts, facility closures and losing some of the science leadership in the UK, where London-based AstraZeneca is the second-biggest drugmaker, behind GlaxoSmithKline.
Pfizer has made assurances that such cuts would be limited. It has promised to complete AstraZeneca’s research and development hub in Cambridge and to establish the new company’s tax residence, but not headquarters, in England, which would significantly reduce its future tax rate.