Pfizer confirms bid interest in AstraZeneca

Phil Black - PII Editor 28/04/2014

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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.

However, it said recent market developments had prompted it to approach AstraZeneca for a second time.

“AstraZeneca again declined to engage. Pfizer is currently considering its options,” Pfizer said in a statement.

If the deal went through, it would mark the largest takeover of a UK firm by a foreign company.

Pfizer”s statement this morning is a love letter to AstraZeneca”s shareholders.

It talks of “a highly compelling opportunity to realise a significant premium” and offers a “substantial cash payment”.

Pfizer also pledges that AstraZeneca shareholders would be able to take up significant rights in any combined company.

Judged by other pharmaceutical deals, any bid of this size would come at a premium of around 30%, presumably on AstraZeneca”s undisturbed 17 April share price of £37.81.

With a present market value above £50bn, AstraZeneca would cost Pfizer around £65bn.

Pfizer has the cash, with a multi-billion dollar war chest held off-shore to shield it from American tax laws.

If AstraZeneca does not engage, and it hasn”t so far, this bid could turn hostile.

It will be quite a battle.

Pfizer said its initial offer in January was a combination of cash and shares worth £46.61 per AstraZeneca share.

At the time, it represented a 30% premium to AstraZeneca”s share price, although AstraZeneca”s share price has since increased, closing at £40.80 on Friday.

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.

“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.

“The strategic, business and financial rationale for a transaction is compelling,” it added.

AstraZeneca”s shares closed at £40.80 on Friday, giving it a valuation of around £51.5bn.