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Pfizer confirms bid interest in AstraZeneca Pfizer confirms bid interest in AstraZeneca
(about 1 hour later)
US drugs giant Pfizer has confirmed it has contacted AstraZeneca over a possible multi-billion pound takeover.US drugs giant Pfizer has confirmed it has contacted AstraZeneca over a possible multi-billion pound takeover.
Pfizer said it made an initial approach in January, but after "limited high-level discussions" AstraZeneca discontinued the talks on 14 January. Pfizer said it made an initial approach in January in an offer worth £58.8bn, but on Saturday had approached AstraZeneca for a second time.
However, it said recent market developments had prompted it to approach AstraZeneca for a second time. AstraZeneca said the original offer "significantly undervalued" the firm, which employs more than 51,000 staff.
"AstraZeneca again declined to engage. Pfizer is currently considering its options," Pfizer said in a statement. If Pfizer comes up with a successful bid it would be the biggest takeover of a UK firm by a foreign company.
If the deal went through, it would mark the largest takeover of a UK firm by a foreign company. However, AstraZeneca said it was "confident" its strategy would create "significant value" for shareholders on its own.
"The Board remains confident in the ongoing execution of AstraZeneca's strategy as an independent company," it added.
Pfizer said in a statement that AstraZeneca's refusal to engage meant it was currently "considering its options".
Global player
AstraZeneca manufactures drugs in 16 countries focusing on treatments for diabetes, cancer and asthma as well as antibiotics.
It reported £25.7bn in sales last year, with £3.3bn in pre-tax profit.
It has eight sites in the UK and around 6,700 employees.
Recently it has laid off thousands of staff in an effort to reduce its costs to compensate for a fall in sales due to patent losses on blockbuster medicines.
In April, it posted a drop in first quarter profits after its earnings were by hit by patents expiring on some of its older medicines.
'Compelling opportunity'
Pfizer said its initial offer in January was a combination of cash and shares worth £46.61 per AstraZeneca share, worth £58.8bn in total.Pfizer said its initial offer in January was a combination of cash and shares worth £46.61 per AstraZeneca share, worth £58.8bn in total.
At the time, it represented a 30% premium to AstraZeneca's share price, although AstraZeneca's share price has since increased and on Monday morning it jumped nearly 15% to £46.88pAt the time, it represented a 30% premium to AstraZeneca's share price, although AstraZeneca's share price has since increased and on Monday morning it jumped nearly 15% to £46.88p
Pfizer said the deal was "a highly compelling opportunity" for AstraZeneca's shareholders.Pfizer said the deal was "a highly compelling opportunity" for AstraZeneca's shareholders.
It said if the takeover went through, the combined firm would have management in both the US and the UK, but would list its shares on the New York Stock Exchange.It said if the takeover went through, the combined firm would have management in both the US and the UK, but would list its shares on the New York Stock Exchange.
"We have great respect for AstraZeneca and its proud heritage," said Pfizer chairman and chief executive Ian Read."We have great respect for AstraZeneca and its proud heritage," said Pfizer chairman and chief executive Ian Read.
Pfizer said it would only make a firm offer if AstraZeneca directors voted unanimously in favour of the deal.Pfizer said it would only make a firm offer if AstraZeneca directors voted unanimously in favour of the deal.
"The strategic, business and financial rationale for a transaction is compelling," it added."The strategic, business and financial rationale for a transaction is compelling," it added.
Hostile move?Hostile move?
Buying AstraZeneca would give Pfizer, which makes Viagra among other drugs, access to a number of cancer and diabetes drugs.Buying AstraZeneca would give Pfizer, which makes Viagra among other drugs, access to a number of cancer and diabetes drugs.
However, Justin Urquhart Stewart, head of corporate development at Seven Investment Management, told the BBC the price Pfizer is offering was still too low to secure a deal.However, Justin Urquhart Stewart, head of corporate development at Seven Investment Management, told the BBC the price Pfizer is offering was still too low to secure a deal.
"It's too close to what it is priced at in the market," he said."It's too close to what it is priced at in the market," he said.
"They've tried to talk to the management and gain agreement but that's not happened so they are considering now going directly to the shareholders"."They've tried to talk to the management and gain agreement but that's not happened so they are considering now going directly to the shareholders".
Citi analyst Andrew Baum said he believed there was now a 90% chance that Pfizer would acquire AstraZeneca for at least around £49 a share.Citi analyst Andrew Baum said he believed there was now a 90% chance that Pfizer would acquire AstraZeneca for at least around £49 a share.
Linda Yueh, the BBC's chief business correspondent, notes that AstraZeneca is a key UK firm in the area of research and development (R&D) and also in exports.Linda Yueh, the BBC's chief business correspondent, notes that AstraZeneca is a key UK firm in the area of research and development (R&D) and also in exports.
"AstraZeneca's £7bn of drugs sold every year accounts for a whopping 2.3% of British goods exports," she added."AstraZeneca's £7bn of drugs sold every year accounts for a whopping 2.3% of British goods exports," she added.
AstraZeneca has eight sites across the UK and around 6,700 employees. However, it has already laid off thousands of staff as it shrinks its cost base to cope with a fall in sales due to patent losses on blockbuster medicines.
In April, it posted a drop in first quarter profits after its earnings were by hit by patents expiring on some of its older medicines.
Pre-tax profits in the quarter fell to $638m (£380m), down from $1.3bn in the same period last year.
Pfizer has made other major acquisitions, its most recent being the $68bn (£40.4bn) purchase of Wyeth in 2009.Pfizer has made other major acquisitions, its most recent being the $68bn (£40.4bn) purchase of Wyeth in 2009.
However, this would mark its biggest foreign acquisition.However, this would mark its biggest foreign acquisition.
It would also be the largest foreign takeover of a British firm, beating some of the more recent deals which include:It would also be the largest foreign takeover of a British firm, beating some of the more recent deals which include:
However, the BBC's business editor, Kamal Ahmed, warned Pfizer's takeover approach could turn into a lengthy battle.However, the BBC's business editor, Kamal Ahmed, warned Pfizer's takeover approach could turn into a lengthy battle.
"If AstraZeneca does not engage, and it hasn't so far, this bid could turn hostile," he said."If AstraZeneca does not engage, and it hasn't so far, this bid could turn hostile," he said.