Pfizer bid still too low - AstraZeneca

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London - AstraZeneca rejected another takeover offer from Pfizer as too low yesterday, leaving the companies in a stalemate over a deal that would create the world’s biggest drug maker. AstraZeneca shares plunged.

The £69.4 billion (R1.2 trillion) proposal failed to account for the value of AstraZeneca’s pipeline of experimental medicines and presented risks for shareholders,the British drug maker said in a statement.

The offer, which Pfizer said was final, values the company at £55 a share. AstraZeneca said the price would have to exceed £58.85 for the board to be able to recommend it to shareholders.

AstraZeneca fell as much as 15 percent, the biggest intraday decline since October 1997. The stock was down 10.44 percent at £43.20 at 1.25pm in London.

The share price drop reflects investors’ view that Pfizer will walk away rather than sweeten the bid again before a May 26 deadline set by UK takeover law. Pfizer said the cash-and-stock offer would be its last under the process, and it would not go directly to AstraZeneca shareholders with a hostile bid.

“There’s still a chance that AstraZeneca shareholders will put pressure on management and try to push for a compromise, but the chances of this deal not being agreed on just increased,” Savvas Neophytou, an analyst at Panmure Gordon in London, said.

With a deal, Pfizer would transfer its legal residence to the UK to gain a lower tax rate, add new cancer drugs to its pipeline and reduce costs from overlapping operations.

“We have tried repeatedly to engage in a constructive process with AstraZeneca,” Pfizer chief executive Ian Read said on Sunday. “We do not believe the AstraZeneca board is 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.”

Pfizer’s initial bids led to Read’s grilling in front of UK legislators, who expressed concern that a takeover would gut AstraZeneca’s research in the UK and hurt British jobs.

Pfizer has said it would complete a campus being built by AstraZeneca in Cambridge and keep 20 percent of its research and development workers in the UK for at least five years.

On May 2 US-based Pfizer offered £50 a share, after a previous bid in January. AstraZeneca objected to Pfizer’s plan to pay only 32 percent in cash, with the rest in shares. The new proposal contains 45 percent cash.

AstraZeneca said Pfizer’s plan to move its tax domicile, and the fact that the majority of the price would be paid in stock, presented risks to shareholders.

Read promised restraint. “We will remain disciplined in the price we are willing to pay.”

AstraZeneca chairman Leif Johansson said Pfizer’s approach “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… Pfizer has failed to make a compelling strategic, business or value case.” – Bloomberg


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