AstraZeneca has rejected Pfizer's £63 billion sweetened takeover offer, saying the financial and other terms described in the proposal are inadequate and "substantially undervalue" the Anglo-Swedish drugmaker.
AstraZeneca goes on to say the proposals "are not a basis on which to engage with Pfizer", noting that "the large proportion of the consideration payable in Pfizer shares and the tax-driven inversion structure remain unchanged". Chairman Leif Johansson noted that the firm "continues to invest significantly in R&D and manufacturing in the UK, Sweden and the USA" and "we are showing strong momentum as an independent company, in particular with our exciting, rapidly progressing pipeline".
He added that Pfizer’s proposal "would dramatically dilute AstraZeneca shareholders’ exposure to our unique pipeline and would create risks around its delivery. As such, the board has no hesitation in rejecting the proposal".
The latest offer from the US giant represented a 32% premium on AstraZeneca’s share price on April 17 the date before market speculation about Pfizer's interest. The offer is broken down into 32% cash and 68% shares, slightly up from the 30%-70% split from the original proposal made in January which was rejected.
Pfizer chief executive Ian Read said "we have seen significant positive market reaction to the announcement we made on April 28, including from the shareholders of both our companies". He added that "the consistent message we have heard reinforces our belief that there is a highly compelling strategic, business and financial rationale for combining our businesses".
Mr Read added that "our proposal is responsive to the views of AstraZeneca shareholders and provides a sound basis upon which to arrive at recommendable terms for the combination of our two companies". AstraZeneca has not rejected the offer outright but says the board will meet to discuss the proposal "and a further announcement will be made when appropriate".
Pfizer's interest in AstraZeneca has caused considerable concern in the UK about the effect a deal would have on the country's research base. Mr Read has written to Mr Cameron saying that "we recognise that our approach may create uncertainty for the UK government and scientific community [so] we would therefore like to assure the Government of our long-term commitment to the UK where Pfizer already employs a significant number of colleagues across research, commercial and administrative roles".
Among a "series of significant and tangible commitments", he noted that Pfizer will establish the combined company’s corporate and tax residence in England and complete the construction of the currently planned AstraZeneca Cambridge campus. Mr Read also committed to employ a minimum of 20% of the combined company’s total R&D workforce in the UK "going forward" but made no mention of job cuts, adding that Pfizer will "actively look to locate manufacturing operations" here, "subject to the timing of the UK Patent Box proposals, and will retain substantial commercial manufacturing".
Reacting to Pfizer's latest bid, Panmure Gordon analyst Savvas Neophytou issued a note saying that "the science bit is clear [and] the maths adds up to £50 per share". However, "we believe investors should wait for the 'art' bit of M&A - which should push the offer up towards £55".
Mr Neophytou added that "with tax inversion a significant motive, we await a higher offer before expected rule changes make re-incorporation more difficult". The US government is looking at ways to stem the tide of local companies moving headquarters abroad for tax benefits.