AstraZeneca rejects new Pfizer offer

FILE - This Friday May 2, 2014 file photo shows an exterior view of the Two Kingdom Street building which houses the headquarters of AstraZeneca, in the Paddington area of London. The board of AstraZeneca has rejected the improved $119 billion takeover offer from U.S. drugmaker Pfizer, Monday May 19, 2014, a decision that has caused a sharp slide in the U.K. company's share price as investors think it effectively brings an end to the protracted and increasingly bitter takeover saga. (AP Photo/Matt Dunham, File)
FILE - This Friday May 2, 2014 file photo shows an exterior view of the Two Kingdom Street building which houses the headquarters of AstraZeneca, in the Paddington area of London. The board of AstraZeneca has rejected the improved $119 billion takeover offer from U.S. drugmaker Pfizer, Monday May 19, 2014, a decision that has caused a sharp slide in the U.K. company's share price as investors think it effectively brings an end to the protracted and increasingly bitter takeover saga. (AP Photo/Matt Dunham, File)

LONDON -- The board of AstraZeneca on Monday rejected the improved $119 billion takeover offer from U.S. drugmaker Pfizer, a decision that caused a sharp slide in the U.K. company's share price as many investors think it effectively brings an end to the protracted takeover attempt.

The board said in a statement that it "reiterates its confidence in AstraZeneca's ability to deliver on its prospects as an independent, science led business."

Pfizer, the world's second-biggest drugmaker by revenue, has been courting No. 8 AstraZeneca since January, arguing their businesses are complementary. On Sunday, it raised its stock-and-cash offer by 15 percent to $118.8 billion. That would be the richest acquisition ever among drugmakers and the third-biggest in any industry, according to figures from research firm Dealogic.

AstraZeneca didn't take long to reject the new offer, with its board arguing Pfizer is making "an opportunistic attempt to acquire a transformed AstraZeneca, without reflecting the value of its exciting pipeline" of experimental drugs.

Because Pfizer said it won't raise its offer again or initiate a hostile takeover bid over the heads of AstraZeneca's board, the prospect of a deal looks increasingly remote unless AstraZeneca shareholders urge a change of mind. Pfizer has said it hopes AstraZeneca's shareholders will push for a deal.

"This has been going on for quite some time and we have been in very deep engagement over the whole of the weekend," AstraZeneca Chairman Leif Johansson told the BBC. "If Pfizer now says this is the final offer, I have to believe what they say."

Johansson said his management team had told Pfizer Inc. over the weekend that it would need a 10 percent improvement on the $90-per-share offer that was on the table at that time. He said Pfizer's latest offer represented only a "minor improvement."

Though it has said its indicative offer is final, Pfizer has, under U.K. takeover rules, until 5 p.m. local time May 26 to make a formal bid. If it doesn't, it cannot make another offer for six months.

Pfizer's offer comes amid a surge of other deals as drugmakers look to grow or eliminate noncore assets to focus on their strengths. Those deals include Switzerland's Novartis AG agreeing to buy GlaxoSmithKline's cancer-drug business for up to $16 billion, to sell most of its vaccines business to GSK for $7.1 billion, plus royalties, and to sell its animal health division to Eli Lilly and Co. of Indianapolis for about $5.4 billion. Canada's Valeant Pharmaceuticals has also made an unsolicited offer of nearly $46 billion for Botox maker Allergan that has been turned down.

Pfizer's latest offer increased the ratio of cash AstraZeneca shareholders would receive, from 33 percent to 45 percent. The latest offer would give them the equivalent of about $92.50 for each AstraZeneca share.

Pfizer Chief Executive Officer Ian Read said the proposed combination would yield "great benefits to patients and science in the U.K. and across the globe."

AstraZeneca has insisted Pfizer's offers significantly undervalue the company and its portfolio of experimental drugs. The company and British government officials also have raised concerns about the prospect of job cuts, facility closures and losing some of the science leadership in the U.K., where London-based AstraZeneca is the second-biggest drugmaker, behind GlaxoSmithKline PLC.

Pfizer has said such cuts would be limited. It has promised to complete AstraZeneca's research and development hub in Cambridge and pledged to establish the new company's tax residence, but not headquarters, in England, which would significantly reduce its future tax rate.

But layoffs would be inevitable in such a big merger, analysts said, and Pfizer has a track record of eliminating tens of thousands of jobs as a result of huge deals.

While Pfizer is best known to the public for Viagra, cholesterol fighter Lipitor and other widely used medicines, in the pharmaceutical industry it's known for two other things: marketing muscle and mega mergers, which together have repeatedly propelled it to the top.

Since 2000, it has made three acquisitions that have vaulted the company to No. 1 in revenue. It paid $111.8 billion for Warner-Lambert Co. in 2000 to get the rights to Lipitor, then $59.8 billion for Pharmacia Corp. in 2003 and $68 billion for Wyeth in 2009, according to Dealogic. With a deal with AstraZeneca were reached, Pfizer would be the buyer in four of the 10 richest deals ever in the pharmaceutical industry.

Business on 05/20/2014

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