In the latest round of a proposed combination of Pfizer and AstraZeneca, AstraZeneca has rejected a proposal by Pfizer to acquire AstraZeneca for £50.00 ($84.47) per share or $106 billion. Pfizer made its latest proposal under which AstraZeneca shareholders would receive for each AstraZeneca share 1.845 shares in the combined entity and 1,598 pence in cash. The proposal represented an indicative value of £50.00 ($84.47) per AstraZeneca share, based on Pfizer's closing share price of $31.15 (and an exchange rate of $1.00:£0.5919) on May 1, 2014. Earlier this week, Pfizer confirmed that it had made a proposal to acquire AstraZeneca in January 2014 for a combination of cash and shares in the combined entity representing an indicative value of £46.61 ($76.62) per AstraZeneca share or approximately $100 billion. AstraZeneca rejected that the proposal and declined subsequent discussions, and Pfizer has continued to express an interest in acquiring the company.

AstraZeneca Chairman Leif Johansson said: “AstraZeneca continues to invest significantly in research, development and manufacturing in the UK, Sweden and the US,” in a company statement. “We are showing strong momentum as an independent company, in particular with our exciting, rapidly progressing pipeline, which the Board believes will deliver significant value for shareholders. Pfizer's proposal would dramatically dilute AstraZeneca shareholders' exposure to our unique pipeline and would create risks around its delivery. As such, the Board has no hesitation in rejecting the Proposal.”

AstraZeneca commented that the Pfizer proposal “substantially undervalue[s] AstraZeneca and [is] not a basis on which to engage with Pfizer. The large proportion of the consideration payable in Pfizer shares and the tax-driven inversion structure remain unchanged.” AstraZeneca urged that its shareholders take no action.

Prior to AstraZeneca’s rejection of the latest $106-billion proposal by Pfizer, Pfizer Chairman and CEO Ian Read sent a letter to UK Prime Minister David Cameron to “address the concerns of the UK Government and science community and your desire to have firm and enduring assurances from us about our commitment to the UK and its life sciences agenda.” Read outlined Pfizer’s commitment to the UK as follows:
 
* Pfizer commits to establishing the combined company's corporate and tax residence in England.
* Pfizer commits to complete the construction of the currently planned AstraZeneca Cambridge campus, creating a substantial R&D innovation hub in Cambridge and the wider scientific community, which will include core research units, laboratory-based scientific support lines, and European clinical development and regulatory functions.
* Pfizer will base key scientific leadership in the UK who will lead all European and certain global R&D functions based in Cambridge.
* Pfizer commits to integrate the operations of the combined company so as to employ a minimum of 20% of the combined company's total R&D workforce in the UK going forward.
* Pfizer will actively look to locate manufacturing operations of the combined company in the UK, subject to the timing of the UK Patent Box proposals, and will retain substantial commercial manufacturing facilities in Macclesfield.
* Pfizer commits to base the combined company's European business headquarters in the UK.
* Pfizer commits to base the combined company's EU Regulatory headquarters in the UK.
* Pfizer commits to invite at least two AstraZeneca Board Members to join the Board of the new company.
* Pfizer commits to hold, as appropriate, Board Meetings in the UK and participate meaningfully in the UK commercial, economic and social community.

“Clearly, predictability and stability in the local and global commercial environment, as well as the UK Government's efforts to maintain incentives for investment, are important factors to enable success.” said Read in the letter. “We make these commitments for a minimum of five years, recognizing our ability, consistent with our fiduciary duties, to adjust these obligations should circumstances significantly change. Our Board has endorsed these commitments in a formal Pfizer Board resolution and will publish a statement describing these promises to the British public. In reflection of the binding nature of these commitments, we are including this letter in our public announcement issued pursuant to the UK Takeover Code regarding the possible combination.”

See related story, “Pfizer and AstraZeneca, What Would a Combined Company Offer?”

Source: Pfizer and AstraZeneca