Things are likely to turn hostile now that AstraZeneca has turned down Pfizer's second takeover approach and the US giant has clearly not been put off.
Pfizer made its first approach at the end of November and proposed a deal in January worth £46.61 per share, before trying again at the weekend. AstraZeneca responded by noting that it had chosen not to engage in discussions due to the absence of "a specific and attractive proposal".
The Anglo-Swedish drugmaker was not impressed with the offer which comprised £13.98 in cash (30%) and 1.758 Pfizer shares (70%) per AstraZeneca share, valuing the deal at around £59 billion. Its board concluded that the proposal "very significantly undervalued AstraZeneca and its prospects" and also "raised certain concerns regarding the execution risks associated with the proposed inversion structure, as Pfizer would redomicile to the UK for tax purposes".
The board added that it "remains confident in the ongoing execution of AstraZeneca’s strategy as an independent company and that its successful delivery will create significant value for shareholders".
However Pfizer is unlikely to back down just yet. On a conference call, chief executive Ian Read spoke of his admiration for AstraZeneca, especially its oncology franchise, but also stressed the tax-saving benefits of the deal. However, this practice of US firms moving its tax domicile overseas is causing much consternation across the Atlantic.
On this side of the pond, there is a lot of concern about what the deal would mean for jobs and investment in the UK. Mr Read said he could give no guarantees but noted that "we see the UK as an attractive place to do science and manufacturing. Jobs and investment tend to follow incentives", noting measures such as the patent box.
Linda McCulloch from the UK's largest trades union Unite, said “it is absolutely crucial that if Pfizer succeeds in its bid there must be guarantees of no jobs losses and for the protection on the UK’s R&D base". She added that AstraZeneca is "strategically significant for the UK economy" and "we expect the UK government to pay special attention to this bid and do everything possible to protect jobs and to support the UK’s knowledge base".
So what next? Under UK takeover rules, Pfizer has until May 26, to make a firm offer, although that can be extended. The company has said it would be prepared to pay a "significant premium" and most observers believe that a bid will have to rise to the £55-£60 per share region, leaning towards more cash than stock, before much will happen.