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| Pfizer pulls out of fight for AstraZeneca | Pfizer pulls out of fight for AstraZeneca |
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| One of the most bitterly contested takeover battles for a British firm in years has ended in recrimination as the US drugmaker Pfizer was forced to walk away from a £69bn bid for AstraZeneca, sparking protests from some City institutions. | One of the most bitterly contested takeover battles for a British firm in years has ended in recrimination as the US drugmaker Pfizer was forced to walk away from a £69bn bid for AstraZeneca, sparking protests from some City institutions. |
| Scientists, unions and politicians on both sides of the Atlantic had lined up to criticise a deal they said was motivated by tax avoidance and cuts to research jobs. | |
| However, in a sign of how much hope investors had placed in a deal going ahead, nearly £7bn was wiped off AstraZeneca's share value as the market reacted to rejection of Pfizer's final bid of £55 a share. | |
| The US company's approach was turned down by AstraZeneca's chairman as "inadequate" and a "significant risk" to shareholders, employees and the UK's position at the forefront of scientific research. | |
| Leif Johansson referred pointedly to Pfizer's plans to switch the combined firm's tax base to the UK, as well as the US company's admission in parliamentary hearings that there would be job cuts and a reduction in the combined companies' research and development spending. | |
| "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 minimisation," said Johansson. "From our first meeting in January to our latest discussion [on Sunday night], and in the numerous phone calls in between, Pfizer has failed to make a compelling strategic, business or value case." | "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 minimisation," said Johansson. "From our first meeting in January to our latest discussion [on Sunday night], and in the numerous phone calls in between, Pfizer has failed to make a compelling strategic, business or value case." |
| Pfizer, described by a former AstraZeneca boss as a "praying mantis" that "sucks the lifeblood out of their prey", admitted defeat on Monday in its months-long campaign to pull off the biggest-ever foreign takeover of a British company. | |
| Under City rules, the only way of resurrecting the deal would be if AstraZeneca's shareholders forced the company to reconsider the offer it has already rejected. | |
| Ian Read, the Scottish-born American Pfizer chairman and chief executive, admitted that there was "nothing more we can do". | Ian Read, the Scottish-born American Pfizer chairman and chief executive, admitted that there was "nothing more we can do". |
| David Cameron, who has been accused by Labour of being a cheerleader for the deal, said that the government "quite rightly should be neutral in this." The business secretary, Vince Cable, said: "We are monitoring what is happening since the AstraZeneca board very firmly rejected the proposal. The government's position is unchanged. We are keeping all options open. We have made it very clear that what we're out to protect is the national interest in research and development, manufacturing, and jobs." | David Cameron, who has been accused by Labour of being a cheerleader for the deal, said that the government "quite rightly should be neutral in this." The business secretary, Vince Cable, said: "We are monitoring what is happening since the AstraZeneca board very firmly rejected the proposal. The government's position is unchanged. We are keeping all options open. We have made it very clear that what we're out to protect is the national interest in research and development, manufacturing, and jobs." |
| Chuka Umunna, the shadow business secretary and one of the deal's most vocal critics, said the rejection was welcome. | Chuka Umunna, the shadow business secretary and one of the deal's most vocal critics, said the rejection was welcome. |
| However, Pfizer urged AstraZeneca's shareholders to speak out, with two big investors, the investment firm Axa and the fund manager Jupiter, publicly criticising the firm. | However, Pfizer urged AstraZeneca's shareholders to speak out, with two big investors, the investment firm Axa and the fund manager Jupiter, publicly criticising the firm. |
| Richard Marwood, senior investment manager at Axa Investment Managers, which holds a 4.6% stake in AstraZeneca, said he was "very disappointed" and rejecting the deal was "not necessarily acting in shareholders' best interests". | |
| Jupiter Fund Management, a top-30 investor, also criticised AstraZeneca for rejecting the offer so categorically. | |
| Speaking on condition of anonymity as AstraZeneca's shares crashed 11% to £42.88, one of the company's 10 biggest shareholders said: "This is the single biggest case of value destruction on behalf of shareholders of all time." The fund manager said the personality clashes between the companies' bosses had "triumphed over shareholder-value creation". | Speaking on condition of anonymity as AstraZeneca's shares crashed 11% to £42.88, one of the company's 10 biggest shareholders said: "This is the single biggest case of value destruction on behalf of shareholders of all time." The fund manager said the personality clashes between the companies' bosses had "triumphed over shareholder-value creation". |
| However, a number of the British company's big investors – including Aberdeen Asset Management, M&G Investments and Woodford Asset Management – supported AstraZeneca's actions. | However, a number of the British company's big investors – including Aberdeen Asset Management, M&G Investments and Woodford Asset Management – supported AstraZeneca's actions. |
| A source close to Pfizer admitted on Monday night that they would be amazed if AstraZeneca's shareholders put enough pressure on the company's board to force it to reconsider the £55-a-share offer. "They would have to make an excruciatingly loud noise," the source said. | A source close to Pfizer admitted on Monday night that they would be amazed if AstraZeneca's shareholders put enough pressure on the company's board to force it to reconsider the £55-a-share offer. "They would have to make an excruciatingly loud noise," the source said. |
| The final nail in the coffin of the proposed deal, which would have seen Pfizer relocate its tax base to the UK to avoid paying a multimillion-dollar US tax bill, was delivered in a transatlantic conference call on Sunday. | The final nail in the coffin of the proposed deal, which would have seen Pfizer relocate its tax base to the UK to avoid paying a multimillion-dollar US tax bill, was delivered in a transatlantic conference call on Sunday. |
| Read spent more than an hour trying to persuade Johansson and AstraZeneca's chief executive, Pascal Soriot, to accept the proposed deal. But the AstraZeneca bosses were adamant that the offer did not reflect the true value of the company's forthcoming cancer drugs and would put lives at risk by delaying drugs. | Read spent more than an hour trying to persuade Johansson and AstraZeneca's chief executive, Pascal Soriot, to accept the proposed deal. But the AstraZeneca bosses were adamant that the offer did not reflect the true value of the company's forthcoming cancer drugs and would put lives at risk by delaying drugs. |
| "If that is what you believe, I really cannot find a way to close a substantial gap," Read told them, according to his account of the call in the Wall Street Journal. "And with that we left it." | "If that is what you believe, I really cannot find a way to close a substantial gap," Read told them, according to his account of the call in the Wall Street Journal. "And with that we left it." |
| Read made the £55-a-share offer public in an email to journalists late on Sunday, hoping it would fire up investors to put pressure on AstraZeneca to engage. But Johansson announced the board's rejection of the offer at 7.08am on Monday without consulting any shareholders. The board's decision was not unanimous. | Read made the £55-a-share offer public in an email to journalists late on Sunday, hoping it would fire up investors to put pressure on AstraZeneca to engage. But Johansson announced the board's rejection of the offer at 7.08am on Monday without consulting any shareholders. The board's decision was not unanimous. |
| Unless AstraZeneca reconsiders the offer, Pfizer will be blocked by the UK's Takeover Panel from making another approach for at least six months. | Unless AstraZeneca reconsiders the offer, Pfizer will be blocked by the UK's Takeover Panel from making another approach for at least six months. |
| Umunna, who has been leading political opposition to the deal and had pledged to block it if Labour won the next election, said: "While Labour was standing up for British jobs and British science, David Cameron and his ministers were cheerleading for a takeover bid where one of the primary motivations was financial engineering – cited by the AstraZeneca board as one of the execution risks justifying rejection of the bid." | Umunna, who has been leading political opposition to the deal and had pledged to block it if Labour won the next election, said: "While Labour was standing up for British jobs and British science, David Cameron and his ministers were cheerleading for a takeover bid where one of the primary motivations was financial engineering – cited by the AstraZeneca board as one of the execution risks justifying rejection of the bid." |
| He added: "Ultimately it is for the shareholders to determine, but it is welcome the AstraZeneca board has remained resolute and sought to act in the best long-term interests of the company and its vital work in developing new life-saving drugs." | He added: "Ultimately it is for the shareholders to determine, but it is welcome the AstraZeneca board has remained resolute and sought to act in the best long-term interests of the company and its vital work in developing new life-saving drugs." |
| Soriot warned MPs last week that development of life-saving cancer drugs could be significantly delayed by a takeover concentrating on "saving tax and saving costs". "Any distractions on work we are doing now could run the risk of delaying our drugs pipeline," he said. "From the lab to the patient takes many years." | Soriot warned MPs last week that development of life-saving cancer drugs could be significantly delayed by a takeover concentrating on "saving tax and saving costs". "Any distractions on work we are doing now could run the risk of delaying our drugs pipeline," he said. "From the lab to the patient takes many years." |
| Read, who had promised that the takeover would be "a win-win" for society, had admitted the deal would lead to job cuts and a big reduction in the combined companies' research and development spending. "I'm not sitting here saying that we can become more efficient without some reduction in jobs," he told MPs. | Read, who had promised that the takeover would be "a win-win" for society, had admitted the deal would lead to job cuts and a big reduction in the combined companies' research and development spending. "I'm not sitting here saying that we can become more efficient without some reduction in jobs," he told MPs. |
| Pfizer cut tens of thousands of jobs after previous takeovers, despite promises to the contrary, and closed most of its research lab in Sandwich, Kent, site of the discovery of Viagra, three years ago. | Pfizer cut tens of thousands of jobs after previous takeovers, despite promises to the contrary, and closed most of its research lab in Sandwich, Kent, site of the discovery of Viagra, three years ago. |
| The only guarantee that Read was prepared to give on British scientists' jobs was that 20% of the combined R&D workforce would be based in Britain for the next five years. But he refused to state whether this would still represent a reduction in UK jobs. | The only guarantee that Read was prepared to give on British scientists' jobs was that 20% of the combined R&D workforce would be based in Britain for the next five years. But he refused to state whether this would still represent a reduction in UK jobs. |
| The company was also under pressure from US politicians over its controversial "tax inversion" plan to move its tax base, but not its headquarters, to the UK to avoid paying tax on £40bn of cash made from profits overseas. | The company was also under pressure from US politicians over its controversial "tax inversion" plan to move its tax base, but not its headquarters, to the UK to avoid paying tax on £40bn of cash made from profits overseas. |
| Investment banking experts said the banks, lawyers, accountants and PR firms advising on the deal could have collected between £300m and £345m if the deal had gone ahead. | |
| Peter Hahn, a former managing director at Citigroup and now finance lecturer at Cass Business School, said advisers typically collect fees worth 0.5% of the deal, which would have worked out at £345m if AstraZeneca had accepted Pfizer's final £55-a-share offer. However, the fees could have been even higher if the takeover battle had become even more contentious. Bankers and other advisers collected £240m advising on Kraft's £12bn takeover of Cadbury in 2010, which works out at 2% of the deal. | |
| Hahn said Pfizer's banking advisers would be feeling sore because investment banking adviser contracts are generally structured so that without a deal there is no fee. | Hahn said Pfizer's banking advisers would be feeling sore because investment banking adviser contracts are generally structured so that without a deal there is no fee. |
| "There'll be some senior guy in New York, it could have easily cost him several million," Hahn said. | "There'll be some senior guy in New York, it could have easily cost him several million," Hahn said. |
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