AstraZeneca Rejects Pfizer's Takeover Attempt Again

In a move marketed as beneficial to both companies’ shareholders, Pfizer has again approached AstraZeneca to take over the company. In a press release, Pfizer said that it was a possible offer, not a firm offer, and fell under Rule 2.4 of the City Code on Takeovers and Mergers. Pfizer said the reasons for the offer were primarily to bring together two established and complementary businesses and increase shareholder value.

Ian Read, Chairman and CEO of Pfizer said, “The United Kingdom has created attractive incentives for companies to manufacture products and maintain and protect intellectual property, and we have seen that capital and jobs have followed these types of incentives.”

Merger Offers

Pfizer Inc. submitted a merger offer to AstraZeneca in January of 2014. The two companies held high-level discussions and AstraZeneca decided to decline the offer on January 14, 2014. Pfizer tabled the merger but said that recent market developments convinced it to re-open talks. On April 26, 2014, Pfizer again contacted AstraZeneca with a proposal to take to both companies’ shareholders. AstraZeneca again indicated that they would not engage in further discussions. 

Pfizer’s plan is to offer cash and shares to AstraZeneca’s shareholders. It feels that its offer has traction and is confident that it can close the transaction. If the deal goes through, the new company will be U.K.-incorporated, with management offices in the U.S. and the U.K. Pfizer outlined the conditions that AstraZeneca would be expected to meet before Pfizer made a firm offer. Those pre-conditions include due diligence reviews and unanimous approval by the board of directors.

Pfizer’s Rational

Since Pfizer made the unsolicited offer, it has compelling reasons for approaching AstraZeneca. The company says that the merger would create a complementary line of products, which would help them reach critical mass and a strong cash flow. However, analysts point to the tax break Pfizer would realize in moving the company from the U.S. to the U.K. The $99 billion dollar deal, one of the biggest transactions ever in the pharmaceutical sector, would save Pfizer about $1 billion in taxes per year, and possibly substantially more.

In the past few years, many U.S. companies have merged with foreign companies such as Actavis and Endo Health Solutions. Those that have not merged raised their voices at the U.S. government, saying that the tax rates are uncompetitive in a global market. Pfizer’s CEO, Ian C. Read, said that he intends to pursue AstraZeneca but also that he hopes that the U.S. government will help American companies be more competitive in the world marketplace.