AstraZeneca rejects ‘final offer’ for takeover by Pfizer

AstraZeneca has rejected what Pfizer says is its “final offer” in their ongoing talks to acquire the UK firm. What next?

AstraZeneca and Pfizer have been trapped in a stalemate for the past couple of weeks over the US pharmaceutical firm’s bid to acquire its Anglo-Swedish rival. But it seems the UK firm is determined to remain independent, having confirmed that it has formally rejected Pfizer’s final proposal for acquisition.

Pfizer says that it significantly increased its final offering to the tune of 15 per cent from the proposals it made on 2 May. The terms of the deal would have seen AstraZeneca’s shareholders receive 1.747 shares in the merged company for every share they currently hold in the British-based company, which equates to roughly £55.

The cash component of the deal rose from 33 to 45 per cent, indicating an increase of around £11.3 billion. So why would AstraZeneca refuse such a large offer?

In its statement on the proposals the UK firm makes it quite clear the price simply isn’t right. Given its position as a research-heavy company, the board believes the firm’s prospects could well be much brighter than Pfizer has so far acknowledged.

“AstraZeneca has created a culture of innovation, with science at the heart of its operations, which will continue to create significant value for patients, shareholders and all stakeholders of AstraZeneca,” adds the company’s chairman Leif Johansson.

“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.”

Equally interesting is the fact that AstraZeneca is deeply suspicious of Pfizer’s motivations. Mr Johansson says that the US firm is mostly interested in its rival because of the tax advantages that would come from registering the merged entity in the UK, rather than from any real strategic vision.

Given the government attention that has been levelled at the takeover bid in the UK, as fears have risen that a merger could cost jobs and hinder scientific research in the country, it is easy to see why Pfizer might be wise to let this deal die.

But it has until 26 May to start formal talks with AstraZeneca, and if it does come up with a better offer there is nothing to prevent the merger from happening. Stocks in the UK company have fallen since news emerged of the rejection, so investor pressure could also play a role. Whatever does come next for the two companies, today’s refusal is by no means the end of the story.