Why is Pfizer still pursuing AstraZeneca acquisition?

Pfizer has seen two previous bids to acquire AstraZeneca rejected by the company. Why is it making a third attempt?

US pharmaceutical company Pfizer Inc could be set to buy UK firm AstraZeneca Plc at a premium – on its third attempt. The world’s biggest drug group has announced that it has approached AstraZeneca twice already this year. But Pfizer’s proposition was rejected when the first overtures were made in January, and again when it renewed its interest on Saturday, 26 April, the company has confirmed.

The UK firm says that was because the suggested figures of £46.61 per AstraZeneca share “significantly undervalued” the business and its future prospects.

However, it seems that Pfizer has not been put off, having made a formal announcement of a possible offer for its UK rival this week. That doesn’t automatically mean that there will be an offer, or that AstraZeneca will welcome one.

It does suggest that Pfizer is readying itself for a fight to pull off one of the biggest deals in the industry’s history. According to the Guardian, it now has until 26 May to make a firm offer unless it is granted an extension.

So why is Pfizer still interested? The pharmaceutical industry has seen a flurry of activity in recent months as companies look for advantages in a competitive market. Allergan refused an unsolicited takeover approach from Valeant and Bill Ackman earlier this month. AstraZeneca would provide Pfizer with access to a large pool of research expertise and a new pipeline of the high-value cancer drugs which AstraZeneca is working on.

There is also a big financial draw – Pfizer has said that it is attracted to the UK’s “incentives” for businesses and intellectual property protections. Since the proposed deal would involve both companies belonging to a single holding company registered in the UK, it does seem that that the US company is also looking for a tax-efficient outlet for its large reserves of capital.

If Pfizer gets its way and manages to acquire AstraZeneca, it will represent the biggest foreign acquisition of a UK company. Markets will be watching over the coming month to discover what that means for investors.