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AstraZeneca rejects £69 billion Pfizer takeover Astra’s rejection of £69bn Pfizer bid makes its share value plummet
(about 5 hours later)
AstraZeneca has rejected Pfizer’s ‘final’ £69 billion takeover attempt saying it “falls short of AstraZeneca’s value as an independent, science-led company”, sending shares slumping 13 per cent as the City bet the battle was over. AstraZeneca lost £6.75bn of its share price value yesterday as the City responded to its rejection of Pfizer’s £69bn “final” takeover bid.
AstraZeneca’s chairman, Leif Johansson, said Pfizer’s £55-a-share bid, raised from £50 a fortnight ago and sharply higher than Astra’s last unaffected share price of £35, was “inadequate”. Big shareholders like Axa and Jupiter voiced their disappointment at the British company’s refusal to open discussions after Pfizer upped its offer price late on Sunday.
He claimed that Astra’s board would have backed a deal at £58.85, or more than 10% above £53.50, a price Pfizer offered the British drugmaker on Friday — but dismissed the £55 bid. Astra’s chairman Leif Johansson rejected the new price of £55 per share yesterday morning and spent the rest of the day touring City investors’ offices to reassure them the company was worth more in the long term as an independent business.
Shareholders in the FTSE 100 company today said they were “disappointed and surprised” by its decision. Pfizer declared that its fourth offer – made after a weekend of talks with Astra’s board triggered by a slightly lower bid on Friday night – was “final”, and that it would not go hostile, or make the offer directly to shareholders without the backing of the target company’s directors.
One top institutional investor said: “AstraZeneca’s board is going to be under huge pressure to prove that the company’s shares are worth £55 or more. Pfizer called on Astra’s shareholders to urge their board to open talks, but the general mood in the City and in the US, where nearly half of Astra’s investors are based, was that the deal would not happen by next Monday’s deadline. That was why Astra’s share price tumbled 11 per cent to £42.87 by the end of the day. Pfizer’s shares gained 1 per cent to $29.44 in late New York trading.
“If they languish around the levels they have fallen to today, then Pascal Soriot and his team will be facing unrest. They are going to have to deliver their promises — quickly — or there will be call for change.” After Monday, Pfizer has to wait another six months before launching another bid.
Asked whether the takeover tussle was over, Johansson said: “I can sincerely say I don’t know. That is up to Pfizer. You have to ask them how they think it’s going to pan out.” Axa, which owns about 5 per cent of Astra, said it was “very disappointed” by the UK company’s behaviour, declaring it was “not in shareholders’ interests”.
Analysts were divided on what happens next. Marc Goodman at UBS wrote: “We still believe Pfizer can find more productive use for $116 billion [£69 billion],” while Panmure Gordon’s Savvas Neophytou noted: “We expect shareholders to press AstraZeneca to accept this new offer but management will likely want to resist.” Jupiter Asset Management said it too was “disappointed”. Other investors speaking on condition of anonymity said they were also irritated by the Astra board’s intransigence. One said: “We believed it would be enough for AstraZeneca to at least start engaging with Pfizer, which is something we have told them they should be doing. The latest bid is within shot of being a good price for the company.”
After a two-hour video conference call between the two sides, AstraZeneca expressed annoyance at Pfizer’s move to go public with the latest approach without giving it warning. Some investors pointed out that the price was attractive when set against the historic value of Astra’s shares. Astra responded by arguing that the company was on the cusp of a major transformation which rendered its previous share performance irrelevant.
The US Viagra maker made its latest approach last night, saying its £69 billion offer — which raised the cash component of the deal from around a third to 45% — was “final and cannot be increased”. It added that it would not make a hostile bid and would only proceed with the backing of Astra’s board. One key element of the latest bid that attracted some shareholders was the increase in the cash element of the offer to 45 per cent of the price rather than the 30 per cent at which the bidding started.
Mr Johansson said the board found that, “from our first meeting in January to our latest discussion yesterday, and in the numerous phone calls in between, Pfizer has failed to make a compelling strategic, business or value case”. However, the latest offer still meant shareholders would have had to accept 55 per cent of the proceeds in shares of a business with decidedly risky prospects. That was a point raised by other investors.
The chairman added that: “Our investors are a multi-faceted group with different investment horizons. They have elected the board to be independent and come up with a recommendation.” Aberdeen Asset Management said it was a “big supporter” of the AstraZeneca management but said it wanted the two sides to keep talking. “There is a lot more to this deal than just price,” said Aberdeen’s fund manager Anne Richards.
Pfizer has until May 26 to persuade AstraZeneca to enter talks, otherwise  it is banned from making another approach for six months Pfizer had to convince shareholders they would be able to reduce the “high-level risk” of disruption to the business both before and after the deal.
Astra’s shares lost 640.5p to 4183.5p. Standard Life said the price was “some way short” of being the knockout bid the markets had expected.
The major Swedish shareholder, Investor AB, was also said to be strongly behind the decision to reject the deal. Last week, Investor AB spoke of how it invests for the long term in its companies, and was a big believer in the way Astra has turned around its business in recent years.
For the Government, the deal’s apparent demise removes a potential embarrassment as Labour has made great play of the Coalition’s reluctance to interfere with a deal that was likely to cost UK research jobs.
David Cameron repeated his view that “this is a matter for the companies to resolve themselves”, although the shadow Business Minister, Chuka Umunna, welcomed the bid’s rejection.
Aberdeen’s Ms Richards pointed out that the deal posed a dilemma for fund managers representing a wide range of shareholders’ opinions. “Some will be wanting us just to run their money and achieve the best price, but other clients feel pharmaceuticals is such a critical part of the UK economy that this deal should not happen at all. It is important for us to look at all these issues.”
For the personal finances of Astra chief Pascal Soriot, the demise of a takeover would see him kiss goodbye to a £7.5m windfall – representing the amount his personal shareholding would profit. “He has put his money where his mouth is on this decision,” said one member of the AstraZeneca camp.