Pfizer’s sweetened bid to acquire AstraZeneca for £55, up from £50 per share, has been rejected.
The new offer, suggested over the weekend, values the Anglo-Swedish drugmaker at £69.3 billion and increases the cash element to 45% from 32%, with the rest payable in Pfizer shares. The US major stressed that the “improved proposal is final and cannot be increased” and it will not make a hostile offer directly to shareholders. The company “will only proceed with an offer with the recommendation of the AstraZeneca board”.
The figure of £55 has been mentioned in many circles as the level whereby a deal could move forward. Pfizer had offered £3.50 more per share on May 16 but said that during discussions earlier on Sunday, “AstraZeneca made clear that it is not currently prepared to accept a price close to Pfizer’s £53.50 proposal”.
The UK drug giant has held steadfast and has rejected the improved bid, with AstraZeneca chairman Leif Johansson saying “the Final Proposal is a minor improvement that continues to fall short of the Board’s view of value and has been rejected”.
He said Pfizer’s bids had been “fundamentally driven by the corporate financial benefits to its shareholders of cost savings and tax minimisation”, adding that “Pfizer has failed to make a compelling strategic, business or value case.”
“We have rejected Pfizer’s Final Proposal because it is inadequate and would present significant risks for shareholders, while also having serious consequences for the Company, our employees and the life-sciences sector in the UK, Sweden and the US.”
Chief executive Ian Read said “we have tried repeatedly to engage in a constructive process [but] we do not believe that the AstraZeneca board is currently prepared to recommend a deal at a reasonable price”. He added that “we remain ready to engage in a meaningful dialogue but time for constructive engagement is running out”, claiming that “other issues that have been raised by AstraZeneca do not represent material difficulties”.
Ana Nicholls, healthcare analyst at the EIU, said: “A Pfizer-AZ deal now looks unlikely, bar a rebellion by AZ shareholders. Pfizer's ‘final’ offer was so much better than its previous one – not just because it raised the price but also because it raised the amount it was prepared to pay in cash – that its own shareholders may well object to it coming back with an even higher bid. AZ has commented on the lack of commercial logic for the deal, beyond the tax and financial savings, but the unpopularity of the deal among UK politicians and media probably also played a role. There may also be a general concern in the industry that mega-mergers destroy rather than create value for shareholders.”
According to AstraZeneca, any new bid would need to be more than 10% above the £53.50 proposal for the board to be able to recommend it.
However, in early trading, AstraZeneca’s shares dropped 13% on the back of the rejected bid, plunging to its lowest in almost 12 years. Under British takeover rules, Pfizer now has to wait six months before it can present a new bid.