Engineering news
AstraZeneca has rejected a new £69 billion takeover offer from US drugs manufacturer Pfizer, saying it would bring uncertainty and risk and undervalued the company.
The announcement followed a weekend of talks involving AstraZeneca chairman Leif Johannson, chief executive Pascal Soriot and finance director Marc Dunoyer after Pfizer made an offer of £53.50 a share for the UK-based group. This was increased to £55 a share at the end of last week, but was again rejected.
Johansson said: "Pfizer's approach throughout its pursuit of AstraZeneca appears to have been fundamentally driven by the corporate financial benefits to its shareholders of cost savings and tax minimisation."
He said that from the time of initial talks in January, Pfizer had "failed to make a compelling strategic, business or value case".
AstraZeneca for the first time put a figure on a value it might have been able to consider putting to its shareholders to recommend a sale – £74.3 billion, nearly £5 billion above the £69.4 billion final offer from Pfizer.
AstraZeneca outlined four key points underlying its rejection of the deal, starting with planned cost-cutting which would "imply a meaningful reduction in research and development potential and capabilities".
It also said the integration of the two companies would risk "significant disruption" to the delivery of its new drugs – echoing Soriot's claim before MPs last week that life-saving medicines could be delayed by the distraction caused by a mega-merger.
The UK firm pointed as well to Pfizer's past record, saying its previous large-scale takeovers had "highlighted the challenges around the negative impact of integration on research and development productivity and output".
Finally, Astra expressed concerns about the impact of plans by the US firm to separate out its operations into three business units.
The rejection statement repeated the concern expressed about the "tax-driven inversion structure" of the deal. This refers to the controversial proposal to re-domicile the newly-merged giant to the UK for tax purposes while maintaining corporate headquarters in the US and a listing on the New York Stock Exchange.
AstraZeneca also pointed to the fact that the majority of the offer was still in the form of shares – which many of its investors would have to sell.
Ian Read, Pfizer chief executive, said last week that it did not believe AstraZeneca was "prepared to recommend a deal at a reasonable price".
"We remain ready to engage in a meaningful dialogue but time for constructive engagement is running out.
"We have said from the beginning that we will remain disciplined in the price we are willing to pay and we will not depart from that guiding principle.
"We believe that our proposal represents compelling and full value for AstraZeneca and that other issues that have been raised by AstraZeneca do not represent material difficulties."
Pfizer said this was its fourth and final offer, and that it would not make a hostile offer direct to AstraZeneca shareholders, instead urging them to press the company's board to begin substantive engagement over a deal. Pfizer's proposal will expire at 5pm on May 26.
Shares in AstraZeneca slumped by more than 14% on the morning of 19 May – meaning its market value slid to £52.1 billion – £17 billion less than the value Pfizer had put on the company.