Pfizer’s slightly sweetened tax-driven cash and stock offer for AstraZeneca was quickly rejected Friday morning. “The financial and other terms described in the Proposal are inadequate, substantially undervalue AstraZeneca and are not a basis on which to engage with Pfizer,” a release from AstraZeneca stated.
“The large proportion of the consideration payable in Pfizer shares and the tax-driven inversion structure remain unchanged.” Leif Johansson, chairman of AstraZeneca, said: “AstraZeneca continues to invest significantly in research, development and manufacturing in the U.K., Sweden and the U.S. We are showing strong momentum as an independent company, in particular with our exciting, rapidly progressing pipeline, which the Board believes will deliver significant value for shareholders. Pfizer’s proposal would dramatically dilute AstraZeneca shareholders’ exposure to our unique pipeline and would create risks around its delivery. As such, the board has no hesitation in rejecting the proposal.”
The chairman of Pfizer sent a letter to British Prime Minister David Cameron confirming its intention to continue the restructuring of AstraZeneca research and development and other functions in the United Kingdom.
AZ plans to operate a headquarters and R&D center in the university city of Cambridge. The new offer totals about $106 billion, according to Reuters. The offer adds uncertainty to Delaware operations of AstraZeneca, which are currently undergoing a downsizing process that will cut 1,200 jobs and result in about 2,000 employees in the state. Under British law, the American company faced a deadline to make a formal offer.
Pfizer has proposed operating twin headquarters in the U.S. and the United Kingdom. The UK has put a number of incentives in place that would lower the tax rate for Pfizer. Earlier, AstraZeneca had expressed concerns about the tax arrangement proposed by Pfizer.
The company’ which made the offer in British pounds, said the it represents a 39 percent premium over the closing price of AstraZeneca in early January. AstraZeneca is based in the UK, but states its financial results in U.S. dollars. AstraZeneca shares have soared after news of Pfizer’s interest surfaced in media reports.
Commenting on the proposal, Ian Read, Chairman and CEO of Pfizer, said: “We have seen significant positive market reaction to the announcement we made on April 28, including from the shareholders of both our companies. The consistent message we have heard reinforces our belief that there is a highly compelling strategic, business and financial rationale for combining our businesses, with significant benefits for shareholders and stakeholders of both companies. We believe our proposal is responsive to the views of AstraZeneca shareholders and provides a sound basis upon which to arrive at recommendable terms for the combination of our two companies.”