Pfizer offers record $106bn for AstraZeneca
New York, May 2, 2014
US drugmaker Pfizer has raised its offer for AstraZeneca to 63 billion pounds ($106 billion), a deal that would create the world's biggest pharmaceuticals company.
Pfizer's pursuit of AstraZeneca, which would boost the American company's pipeline of cancer drugs, cut its tax bill and create significant cost savings, comes amid a wave of deal-making in the healthcare sector.
The US group would much prefer an agreed deal with its rival, since hostile takeovers typically take longer, require a higher final price and carry more risks because the bidder cannot access the target's books to assess its business.
Friday's 50 pounds ($84.47) a share indicative offer follows AstraZeneca's decision to rebuff an earlier proposal that valued it at 58.8 billion pounds, or 46.61 pounds per share.
"Given where the shares have come from, this doesn't look unreasonable," said one fund manager whose institution is among the 10 biggest investors in AstraZeneca.
AstraZeneca shares were trading at around 30 pounds a year ago, but confidence in the company's cancer drug pipeline has built up strongly since then.
"Anything with a five in front is more likely to work than anything with a four in front, just from a sentiment point of view," said analyst Stephen McGarry at Societe Generale.
Investors had previously said they were looking for at least 50 pounds a share and also wanted more cash in the mix. The latest deal would offer 32 per cent cash and 68 percent shares, little different from the 30-70 split offered originally.
AstraZeneca said its board would meet to discuss the Pfizer proposal and a further announcement would be made "when appropriate".
After the initial 46.61 pounds approach, made in January, was disclosed earlier this week, AstraZeneca said that offer fell "very significantly" short and the small cash component would leave investors exposed to the risks faced by Pfizer in executing an ambitious mega-merger.
Some analysts are convinced Pfizer will raise its offer again, once it gets AstraZeneca to the table, not least because it wants to get the deal done before any possible change in US tax rules that might prevent it moving its tax base to Britain.
Pfizer's latest proposal, which is subject to a recommendation by AstraZeneca's board, would see shareholders receiving, for each AstraZeneca share, 1.845 shares in the combined company and 15.98 pounds in cash.
Shares in the British group were barely changed at 48.15 pounds by 4 a.m. EDT. The stock had already gained ground in late trading on Thursday on speculation that Pfizer would come back with an improved offer.
The takeover, which would be the largest acquisition of a British company by a foreign business, has stirred political controversy in Britain.
In an attempt to smooth relations with the government, Pfizer Chief Executive Ian Read wrote to Prime Minister David Cameron, promising to complete a substantial new research center planned by AstraZeneca in Cambridge and retain a manufacturing plant in Macclesfield.
The Cambridge site, in particular, is viewed as important to the development of the so-called "golden triangle" of Britain's life sciences industry, spanning Oxford, Cambridge and London.
Read also said that 20 percent of the enlarged group's research and development workforce would be in Britain.
"We make these commitments for a minimum of five years, recognizing our ability, consistent with our fiduciary duties, to adjust these obligations should circumstances significantly change," Read added in a letter to Cameron.
Science minister David Willetts said Pfizer had moved a long way in its commitments to British science and research, but the opposition Labour party was scathing about the potential deal.
"Pfizer has a very poor record on previous acquisitions. Do we really want a jewel in the crown of British industry, our second biggest pharmaceutical firm, to basically be seen as an instrument of tax planning?" said business spokesman Chuka Umunna.
Pfizer's reputation is under a cloud in Britain following a decision three years ago to shut most of its research work at a large R&D center in Sandwich, southern England, where Viagra was invented, with the loss of nearly 2,000 jobs.-Reuters