After a month-long public fight between two of the world's biggest pharmaceutical companies, Pfizer abandoned its attempt to buy AstraZeneca for £69bn on Monday as the ‘put up or shut up’ deadline approached without an agreement between the two sides.
This morning, shares in AstraZeneca fell 2.4% in early trading after U.S. drugmaker Pfizer confirmed yesterday it would not make a formal bid to acquire its smaller British rival. Its stock is currently trading at around 420p per share, down 13% since Pfizer made its first move on the company a month ago.
Pfizer’s decision to pull out was widely expected after AstraZeneca refused its final offer of £55 a share. The British group was looking for least £58.85 per share for its board to consider a recommendation, after Pfizer promised it would not go hostile by taking its offer directly to AstraZeneca shareholders.
Under British takeover rules, there will now be a cooling off period between the two firms. Pfizer could take another run at its smaller British rival in six months time, or it could return at AstraZeneca’s invitation in three months time.
When AstraZeneca rejected Pfizer’s final offer of £55 a share on Friday, valuing the firm at £69bn, its management said that Pfizer had significantly undervalued the company. Chief Executive Pascal Soriot has drawn up a 10-year forecast for a 75% rise in sales by 2023.
He said that Pfizer had ‘failed to make a compelling strategic, business or value case' - rather, that its bid was mainly down to ‘the corporate financial benefits’ it would have reaped. Britain’s favourable tax rules was ‘one of the key drivers’ behind the Pfizer offer for AstraZeneca, former AstraZeneca CEO Sir David Barnes said earlier this month.
According to Pfizer CEO Ian Read, AstraZeneca turned Pfizer’s fourth and final proposal down after a mere 15-minute conversation on Friday.
‘I think it is regretful because, long term, there was a missed opportunity to have the largest pharmaceuticals company in the world domiciled in the UK, committing 20% of its R&D over a long period. That would have been very healthy for science in the UK and manufacturing in the UK,’ Read told the Telegraph.
A merger of the two pharmaceutical giants would have been the biggest foreign takeover in the history of British business. But the proposal had stoked up a fierce debate among shareholders, politicians and scientists about what a merger could mean for the future of science R&D in Britain.
Politicians in Britain and Sweden - where AstraZeneca has half its roots – were concerned about the likelihood that a union of the two firms would lead to thousands of job cuts. Critics had compared it to previous takeovers of British companies by American ‘predators’, such as Kraft’s merger with Cadbury.
Now that the Pfizer bid has gone, AstraZeneca is under pressure to convince its shareholders it did the right thing, and will need to start delivering on its aggressive 2023 targets soon – or Pfizer could come back for more.