Pfizer makes ‘final’ £69 billion bid for AstraZeneca

Pfizer has made a new and improved bid to acquire AstraZeneca with an offer worth £69.3 billion pounds ($116.6 billion) or £55 a share – and says this is its best and final offer for the firm.

The US company has been pursuing AstraZeneca in private since January, and publicly since late April, but has seen three previous offers rejected. AstraZeneca’s board has spurned the offers so far because of their overall value, and also because of a high proportion of the bid being made up of shares.

Pfizer has addressed AstraZeneca’s objection to the high proportion of shares in the proposed payment, increasing the cash component from 33% of the total offer to around 45 per cent. Bankers close to the deal say that the £55 offer, around 15% higher than the last bid, represents the ‘magic number’ that will finally see AstraZeneca’s resistance crumble, with many shareholders expected to urge the board to enter negotiations.

Huge controversy

However this is a takeover bid like no other, and the style and substance of the proposal has generated unprecedented opposition in the US, where Pfizer is based, and in the UK and Sweden, where AstraZeneca has its roots.

An integral part of Pfizer’s takeover plan is to redomicile, shifting its tax base to the UK in order to avoid payer higher US taxes. This has generated huge controversy on either side of the Atlantic, where a number of politicians have called for the so-called ‘tax inversion’ to be blocked.

This is not the only controversy – Pfizer has a track record of megamergers followed by swingeing cuts to R&D, and its refusals to make guarantees on investment in the UK and Sweden beyond five years has seen its takeover bid strongly opposed by science leaders, unions and some politicians in both countries. AstraZeneca and other observers say the deal will be subject to considerable scrutiny in the UK, Europe, the US and China on anti-trust and tax grounds.

The clock is ticking on Pfizer’s proposal, which under the UK’s takeover code will expire on 26 May. Pfizer says it is asking AstraZeneca shareholders to urge the AstraZeneca board to begin meaningful engagement with Pfizer, which would then allow for the 26 May deadline to be extended while negotiations around a possible transaction ensue.

Commenting on the proposal, Ian Read, Chairman and CEO of Pfizer, said the offer was ‘compelling’ for AstraZeneca shareholders, and said the merger was an exciting opportunity to create “a scientific powerhouse.”

‘Not prepared to recommend at reasonable price’

However it is looks like AstraZeneca’s board has spurned dialogue once again – Pfizer’s statement seeming to indicate that AstraZeneca’s management has already indicated its rejection of this new offer.

Ian Read said in a statement on Sunday: “Following a conversation with AstraZeneca earlier today, we do not believe that the AstraZeneca board is currently prepared to recommend a deal at a reasonable price.”

Read and his executive team have been meeting AstraZeneca’s leading shareholders in an attempt to win their support for the bid. Some investors are expected to urge AZ’s board to talk, but some may argue for its continued independence.

Ian Read added: “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 says that the new bid is its final and best offer, and that it will not pursue a hostile takeover bid for the firm. However the company has included plenty of caveats to these rules, and the UK Takeover Code would allow the firm to re-launch a bid for AstraZeneca after the 26 May deadline, but would have to wait six months to do so.

AstraZeneca had not issued an official response to the new bid by the early hours of Monday morning, UK time.

Links

Pfizer’s new bid – proposal in full

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