Pfizer Inc. (PFE) raised its offer to buy AstraZeneca Plc (AZN) to 69.4 billion pounds ($117 billion) in what the drugmaker described as a final bid to spur negotiations for the industry’s biggest-ever acquisition.
Pfizer said it doesn’t expect AstraZeneca to accept the new cash-and-stock offer, which values the London-based company at 55 pounds a share, and is made up of 45 percent cash. On May 2, New York-based Pfizer offered 50 pounds a share, following a previous bid made in January.
Pfizer said the new offer would be its last under the current process, and that it won’t take its bid hostile and attempt to woo AstraZeneca’s shareholders directly. With a deal, Pfizer would transfer its headquarters to the U.K to gain a lower tax rate, add new cancer drugs to its pipeline and take advantage of cost cuts from company overlaps.
“We have tried repeatedly to engage in a constructive process with AstraZeneca,” Pfizer Chief Executive Officer Ian Read said in a statement today. “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. 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 U.K. lawmakers, who have expressed concern a takeover will gut AstraZeneca’s research operations in the U.K. and hurt British jobs. Pfizer has said it will complete a campus being built by AstraZeneca in Cambridge in the U.K, and keep 20 percent of the London-based company’s research and development workers in that country for at least five years.
‘Friendly Discussions’
“It does sound like this is the last offer they will make if the company does not engage,” said Mark Schoenebaum, an analyst with ISI Group LLC in New York, in an e-mail today. “My guess is that they might go up slightly if they enter friendly discussions.”
In the company statement, Pfizer’s CEO promised restraint. “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,” Read said.
Esra Erkal-Paler, a spokeswoman for AstraZeneca, said she had no immediate comment. AstraZeneca rose 2.1 percent to close at 48.24 pounds on May 16.
AstraZeneca’s board has repeatedly rejected Pfizer’s advances, including a previously unreported offer of 53.5 pounds per share made on May 16, according to the statement. “AstraZeneca indicated that its board believes that Pfizer’s 53.50 pound proposal substantially undervalues the company,” the statement read.
May 26 Deadline
If AstraZeneca’s board won’t come to the table, it could mean the end — for now — to a deal. Pfizer’s offer expires on May 26, and the U.S. drugmaker said it was urging AstraZeneca shareholders to push the company’s board to start negotiating. If another company comes in with an offer, Pfizer could try again — otherwise it will be subject to a waiting period before it can attempt a new bid.
AstraZeneca stockholders would get 24.76 pounds in cash and 1.747 shares of the combined company for each share in AstraZeneca, Pfizer said. The new bid is 10 percent more than the May 2 proposal and is 53 percent above AstraZeneca’s closing price on Jan. 3, before Pfizer made its initial offer.
The acquisition would be the largest ever of a U.K. company, according to data compiled by Bloomberg and would create the world’s biggest drugmaker by sales. Pfizer has said it plans to keep its operational headquarters in New York and move its legal residence to the U.K.
May 2 Offer
The May 2 offer of 50 pounds was made up of 33 percent cash and the rest in stock. An offer with more stock adds risk and long-term potential for AstraZeneca shareholders, while more cash gives them an immediate payout.
There’s a limit to how low Pfizer can drop the stock percentage of the offer and still enable the company to move its legal address to the U.K. for a lower tax rate than the U.S.’s 35 percent. For the lower rate 20 percent of the combined company’s shareholders must be from AstraZeneca’s base. The new offer would give Pfizer’s shareholders 74 percent of the combined company, and AstraZeneca’s 26 percent, Pfizer said.
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