AstraZeneca Rejects Pfizer Latest Offer of Approximately $119 Billion

AstraZeneca has rejected the latest and what Pfizer said was its final proposal for acquiring AstraZeneca. On Sunday, May 18, 2014, Pfizer had reported that on Friday May 16, 2014, it had raised its proposal and cash portion of the deal to £24.76 ($41.64) in cash (45%) and 1.747 Pfizer shares (55%) per AstraZeneca share, representing a value of £55.00 ($92.53) per AstraZeneca share (based on the closing price of Pfizer shares on May 16, 2014) or approximately $119 billion. 

In a statement issued on May 19, 2014, Leif Johansson, Chairman of AstraZeneca said: “Pascal Soriot, Marc Dunoyer, and I had a lengthy discussion with Pfizer over the weekend about the proposal Pfizer made on Friday evening at a value of £53.50 ($90.00) per share. During this discussion, Pfizer said that it could consider only minor improvements in the financial terms of the Friday Proposal. In response, we indicated, even assuming that other key aspects of any proposal had been satisfactory, that the price at which the Board of AstraZeneca would be prepared to provide a recommendation would have to be more than 10% above the level contained in Pfizer's Friday Proposal. The Final Proposal is a minor improvement which continues to fall short of the Board's view of value and has been rejected,” he said.

“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 minimization,” Johansson continued. “From our first meeting in January to our latest discussion yesterday [Sunday May 18th], and in the numerous phone calls in between, Pfizer has failed to make a compelling strategic, business or value case. The Board is firm in its conviction as to the appropriate terms to recommend to shareholders,” he said.

“As an independent company, the entire value of AstraZeneca's pipeline will accrue to our shareholders. Under Pfizer's Final Proposal, this value would be significantly diluted,”Johansson continued. “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.”

AstraZeneca said it rejected the proposal due to the strength of its pipeline, near-term growth, and expectations that it would reach annual revenues of $45 billion by 2023.The AstraZeneca board also noted other issues with the proposed deal: expected cost reductions and a reduction in research and development potential and capabilities; “disruption” to the delivery and value of its pipeline; concerns over other large-scale acquisitions by Pfizer and the negative impact of integration on research and development productivity and output; and Pfizer's announced business segmentation. The board also raised concerns over the tax-driven inversion structure of the Pfizer's proposals.

In making its final proposal, in it statement of May 18, 2014, Pfizer said the proposal expires May 26 and asked for the AstraZeneca board to extend the negotiations. Commenting on the proposal, in a statement on May 18, 2014, Pfizer’s Read said: “We believe our proposal is compelling for AstraZeneca’s shareholders and that a Pfizer-AstraZeneca combination is in the best interests of all stakeholders. We are excited at the opportunity to create a scientific powerhouse, delivering great benefits to patients and science in the UK and across the globe. We stand by our unprecedented commitments to the UK Government. We believe that the benefits to all stakeholders can only be maximized through cooperative engagement between both companies.”

He added: “We have tried repeatedly to engage in a constructive process with AstraZeneca to explore a combination of our two companies. Following a conversation with AstraZeneca earlier today [Sunday May 18, 2014], 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. 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. We believe that our proposal represents compelling and full value for AstraZeneca and that other issues that have been raised by AstraZeneca do not represent material difficulties.”

Source: AstraZeneca and Pfizer


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