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| Pfizer CEO Ian Read |
AstraZeneca's ($AZN) board has rejected Pfizer's ($PFE) sweetened $106 billion bid for the company, dismissing the mix of cash and stock behind the £50 ($84.47)-per-share offer as inadequate and ignoring a pledge from Pfizer to push ahead with a major new R&D complex in Cambridge while retaining a large contingent of researchers in the U.K. for at least 5 years.
"AstraZeneca continues to invest significantly in research, development and manufacturing in the U.K., Sweden and the U.S. 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," noted AstraZeneca Chairman Leif Johansson in a statement. "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."
Pfizer's team is moving fast on this deal, though, and clearly isn't likely to let the board's refusal stop them now. Taking the bid to the £50 threshold was considered key to the campaign to win over AstraZeneca's largest investors, who have dictated high level changes at the U.K. company before.
To calm worried lawmakers and thousands of shaken AstraZeneca staffers, Pfizer CEO Ian Read took the unusual step of issuing a public letter to British Prime Minister David Cameron, assuring the government that at least 20% of the combined company's R&D operations will remain in the U.K., the company will keep its big manufacturing facility in Macclesfield while steering more such work to the country, and a post-merger Pfizer will hold its board meetings in the U.K. as well.
A combined company, wrote Read, would create a powerful global organization focused on "oncology, inflammation, and cardiovascular and metabolic disorders, in which the world class academic research resources in the "golden triangle" of Oxford, Cambridge and London would represent a vital component...."
The U.K. government is not considered a major threat to this deal, but politicians can come away from a prospective deal with an assurance on employment as well as the new biopharma complex in Cambridge, which has gained considerable support in a country that has seen its R&D industry battered by repeated cutbacks in recent years. Pfizer didn't make any friends in the U.K. when it announced plans to close R&D in Sandwich several years ago, though it did wind up retaining about 700 of the 2,000 staffers at the site.
The downsizing move at Sandwich came as Pfizer was shedding tens of thousands of staffers in the wake of a series of big takeovers, the kind of upheaval--complete with global reductions in head counts as well as widespread R&D chaos--that is widely expected to occur again if Pfizer and AstraZeneca are mashed together.
Bernstein's Tim Anderson, who like most analysts was caught completely off guard by Pfizer's unexpected run at a megamerger, says the biggest threat to both pharma giants now is that the deal not get done. If it does collapse, he wrote in a note to investors, then Pfizer's shareholders are likely to wonder what could be wrong at the company, prompting the merger bid. And what new maneuver from left field would follow?
AstraZeneca on the other hand, added Anderson, would face the biggest drop in stock price. The deal only makes sense if Pfizer goes ahead and splits up the business, and no one else is likely to step in as "almost all companies will say that these (megamergers) are out of fashion as they tend to disrupt critical business functions like R&D."
- here's the release from AstraZeneca
- read the release from Pfizer