Pfizer upped the ante in its pursuit of AstraZeneca yesterday, increasing its offer to £55.00 per share from £50 and insisting it was not prepared to go any higher.
AZ swiftly moved to reject the offer, however, saying it “falls short of AZ’s value as an independent science-led company.”
While AZ chairman Leif Johansson did say that it might have been possible to proceed with negotiations if the bid had been higher – by around £5bn – in its present form the proposal represents “significant risks for shareholders” and would also have “serious consequences for the company, our employees and the life sciences sector in the UK, Sweden and the US.”
No hostile bid
Pfizer said outright it has no intention of resorting to a hostile takeover bid for AZ and has appealed to investors to push the company’s board to the negotiating table and bring the £69bn ($116bn) takeover to fruition.
The offer remains provisional – subject to engagement with and the agreement of AZ’s board – and the tone suggests Pfizer chief executive Ian Read has run short of patience, while a rejection of any hostile takeover indicates AZ has convinced its key shareholders to stick with the status quo.
“Following a conversation with AZ earlier today [Sunday], we do not believe that the AZ board is currently prepared to recommend a deal at a reasonable price,” said Read, adding that “the time for constructive engagement is running out.”
The latest statement also reveals that Pfizer made a third offer to AZ last week at a value of £53.50, which was also turned down as substantially undervaluing the firm, and that the US-headquartered company has raised the cash component of its offer from 33 to 45 per cent. It opened bidding with a £46.61 per share bid in April, raising it to £50.00 earlier this month.
Johansson indicated in AZ’s response that an offer would have to have been more than 10 per cent higher than that offer to proceed with negotiations “even assuming that other key aspects of any proposal had been satisfactory.”
AZ has also reiterated its concerns about a merger, and said Pfizer had failed to provide detail on key aspects such as the structure of the merged company, details of its plans for cost-savings and risks associated with the plan to domicile in the UK for tax reasons but keep its headquarters in the US.
“The tax-driven inversion structure remains a key part of Pfizer’s proposals [and] has already been the subject of intense public and governmental scrutiny, particularly in the US,” noted AZ. It is also worried that Pfizer’s proposals to break up its business into separate operating units could lead to “value destruction” if applied to AZ’s business.
A lack of detail on Pfizer’s plans also caused frustration among politicians and unions at a parliamentary hearing on the proposed takeover last week, despite assurances from Read that the company would stand by promises to retain 20 per cent of its R&D staff in the UK and see AZ’s investment programme in Cambridge through to the end.
“We stand by our unprecedented commitments to the UK government,” said Read, adding: “we believe that our proposal represents compelling and full value … and that other issues that have been raised by AZ do not represent material difficulties.”
AZ’s shares have been on the slide since news of the rejected offer emerged this morning, suggesting investors believe the prospect of a deal have all but disappeared, at least for now.