Shares in AstraZeneca (LSE: AZN) (NYSE: AZN.US) fell 12% to 4,250p in early trade after the British drug company, long in Pfizer’s (NYSE: PFE.US) sights, deftly slipped the US giant’s parting shot of £55 per share.
AstraZeneca wasted little time in rejecting the improved takeover offer, comprising of £24.76 in cash and 1.747 shares in the new company, amounting to a value of £55 per share.
No hostile bid
The proposal, which valued AstraZeneca at £69bn, “falls short” of the firm’s worth as an independent science-led entity. Pfizer has said it won’t go hostile — circumventing AstraZeneca’s board with an offer direct to shareholders
Pfizer’s designs were to create the world’s largest drug company with headquarters in New York and a tax domicile in Britain. The US senator, Carl Levin, is seeking to close the tax loophole whereby Pfizer can move “offshore on paper” to avoid paying a higher US tax rate on overseas profits.
“Innovation” and future revenues
Leif Johansson, AstraZeneca’s chairman, commented:
“AstraZeneca has created a culture of innovation, with science at the heart of its operations, which will continue to create significant value for patients, shareholders and all stakeholders of AstraZeneca.”
“As an independent company, the entire value of AstraZeneca’s pipeline will accrue to our shareholders. Under Pfizer’s Final Proposal, this value would be significantly diluted.”
AstraZeneca’s chief executive, Pascal Soriot, has set a target of increasing revenues by 75% over the next decade. To achieve this the firm’s scientists need to devote their fullest attention the the development of new drugs for diseases such as cancer and diabetes — a takeover would crucially split this focus.
Over-optimistic?
Clinical trials still need to be completed, and there are regulatory hoops to jump through, but AstraZeneca’s shares are still up nearly 600p compared to before Pfizer’s interest. This would indicate that the market retains a good deal of faith in Soriot’s projections.
