AstraZeneca rejects Pfizer’s final offer

AstraZeneca has rejected the latest, and apparently last takeover bid by Pfizer, saying the $69.3 billion ($118 billion) offer is 'inadequate'.

The snub came after a weekend of activity for both companies: Pfizer produced a new bid on Friday afternoon of £53.50 per share, and raised the cash component to 40%, but this was rapidly rejected. The bid was raised once more on Sunday to £55 per share, with the cash offer upped to 45%, but this too was dismissed.

After all its efforts, Pfizer has apparently fallen just short of securing a deal: AstraZeneca says it demanded a bid at least 10% higher than the Friday bid, but Pfizer's final bid on Sunday was only 2.8 per cent higher.

In its statement on Sunday evening, Pfizer said it could not abandon a 'disciplined' approach to the price it would pay for the company.

AstraZeneca then confirmed its rejection early this morning, saying the deal was not in the interests of its shareholders.

This leaves Pfizer with few immediate options if it wants to pursue the bid. If Pfizer does walk away for good, as many believe it will, the episode will be a humiliating defeat for the firm, and a moral victory for AstraZeneca's determination to stay independent.

If this is an end to the saga, many in the UK life sciences sector will be very pleased by the result, as many have felt Pfizer's bid was driven by finance, and not science, and that its long-term plan would see investment in British-based R&D cut.

Nevertheless, the reaction of the markets was, not surprisingly, one of disappointment - shares in AstraZeneca have fallen 13% in early trading.

AZ's shareholders have not yet spoken out publicly on the decision; one of the few remaining hopes for Pfizer is that a shareholder rebellion would force AstraZeneca to the negotiating table.

'Driven by financial benefits'

Leif Johansson, Chairman of AstraZeneca 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.

"From our first meeting in January to our latest discussion yesterday, and in the numerous phone calls in between, Pfizer has failed to make a compelling strategic, business or value case. The Board is firm in its conviction as to the appropriate terms to recommend to shareholders."

Johansson said AstraZeneca has created a culture of innovation, with science at the heart of its operations. The company has made ambitious forecasts that it would double its revenues by 2023 to around $45 billion, arguing that shareholders would do better with it as an independent company.

Also significant has been the almost universal opposition among the life sciences community in the UK and Sweden to Pfizer's bid – many pointed to the US company's long track record in megamergers which have all been followed by swingeing R&D cuts.

"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," added Johansson.

AstraZeneca also raised objections to the other aspects of the proposals, including Pfizer redomiciling in the UK, and a planned splitting up of the merged company into separate businesses.

Is this the end?

In political terms, Pfizer deciding to end its pursuit would be good news for UK Prime Minister David Cameron. The Prime Minister had initially been accused of 'cheerleading' for Pfizer's takeover, only to find the mood of the public and life sciences sector against it.  Subsequent government attempts to secure longer term assurances about UK investment beyond five years were rejected by Pfizer.

A decision by Pfizer to accept defeat means Mr Cameron and his coalition government would not have to make difficult decisions about whether or not to intervene in any proposed merger.

Pfizer has insisted that this offer was its last, and that it won't make a hostile takeover bid. UK takeover rules means that Pfizer cannot now raise its bid before the 26 May deadline. The company could however make another bid six months after this date.

There are also numerous caveats that Pfizer has employed in its statements, as well as further opportunities within the UK Takeover Code. These could help keep the bid alive, and Pfizer is yet to formally declare an end to its interest in AstraZeneca.