AstraZeneca rejects Pfizer's final takeover bid; some shareholders express disappointment

AstraZeneca's board on Monday rejected Pfizer's final proposal to acquire the company for 55 pounds per share ($92.50), or a total of around 69 billion pounds ($116 billion), saying it "falls short" of the drugmaker's value. The offer, which was made on Sunday, comprised 24.76 pounds in cash ($41.65) and 1.747 Pfizer shares per AstraZeneca share.

"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," remarked AstraZeneca chairman Leif Johansson. "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," Johansson said.

AstraZeneca noted that Pfizer submitted a revised offer valued at 53.50 pounds ($90.00) per share on May 16, comprising 21.57 pounds ($36.30) in cash and 1.845 Pfizer shares per AstraZeneca share, which was rejected by the board the next day. AstraZeneca subsequently entered discussions with Pfizer executives on May 18 to outline its views around the "substantial shortfall" in value of the proposal. During the talks, Pfizer CEO Ian Read indicated that the company could consider only "minor improvements" to the financial terms of the deal, while AstraZeneca said a price increase of more than 10 percent would be needed in order to provide a recommendation to shareholders.

According to AstraZeneca, without prior notice, Pfizer later announced its final proposal to the market. "The final proposal is a minor improvement which continues to fall short of the board's view of value," Johansson commented, adding "as an independent company, the entire value of AstraZeneca's pipeline will accrue to our shareholders." For related analysis, see ViewPoints: AstraZeneca rejects Pfizer's final offer – 3 key questions...

Shares in AstraZeneca fell as much as 14 percent on the latest news. "There's still a chance that Astra 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," noted Panmure Gordon & Co. analyst Savvas Neophytou.

Fund manager Alastair Gunn of AstraZeneca shareholder Jupiter Fund Management said the firm was "disappointed the board...rejected Pfizer's latest offer so categorically," adding "they should have at least engaged in a constructive conversation...on the details of the offer to assess the opportunities that a combined entity could bring." Gunn commented "there now seems little room left to manoeuvre with Pfizer having ruled out a hostile bid. We will be expressing our dissatisfaction to the AstraZeneca board over the way the bid process has been handled up to now." However, AstraZeneca shareholder Aberdeen Asset Management suggested that Pfizer had room to improve its offer. "The price is finely balanced," Aberdeen Asset Management chief investment officer Anne Richards remarked, adding "I think it's a good price that's on the table at the moment but probably they could do better than that."

Earlier this month, AstraZeneca rebuffed a bid from Pfizer valued at around 63 billion pounds ($106 billion), calling the offer "inadequate." The rejection came ahead of questioning by two UK parliamentary panels into the potential deal, mainly related to concerns over the impact on the country's lifesciences sector. Andrew Miller, chairman of the Science and Technology Committee, said Monday "I think it is almost certain that [Pfizer] will come back and speak to the larger shareholders over the next few days." He suggested that the US company should giver "much firmer and longer guarantees" over its pledges to keep R&D in the UK.

For related analysis, see ViewPoints: Did UK politicians forget to ask Pfizer a vital question as it circles AstraZeneca? and ViewPoints: Soriot looks to perfect balancing act as AstraZeneca, Pfizer questioned by UK government committee over potential merger.

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