AstraZeneca is preparing to reject a £69 billion ($117 billion) takeover bid by rival drugmaker Pfizer just hours after its U.S. suitor said it would walk away if its offer were rebuffed, putting into doubt a deal that would be the largest foreign takeover of a U.K. company.
The £55-per-share bid, upped from £50 two weeks ago, was viewed by key members of AstraZeneca's management team and its board of directors as falling short of properly valuing the company, according to people familiar with the matter.
The two companies discussed the deal over the weekend, including a near two-hour video call on Sunday afternoon. During those talks AstraZeneca executives also indicated they felt that Pfizer failed to give assurances over commitments to the U.K. group's research and development programs and future innovation investment in the U.K..
AstraZeneca worked late into Sunday night considering the offer and is likely to make public its rejection as early as Monday morning, according to the people. No decision is certain, however, and the company could delay its response.
In a statement on Sunday evening, Pfizer said it would not make a hostile bid and would only proceed with the offer with the recommendation of the AstraZeneca board.
The U.S. drugmaker urged shareholders to put pressure on AstraZeneca's board to enter negotiations over the increased proposal of £55 a share, 45 per cent of it in cash.
In outlining his company's new offer on Sunday, Ian Read, Pfizer chairman and chief executive, had expressed frustration with AstraZeneca's repeated refusal to enter talks and appeared braced for another rejection.
"We have tried repeatedly to engage in a constructive process with AstraZeneca to explore a combination of our two companies," he said. "Following a conversation with AstraZeneca earlier today, we do not believe that the AstraZeneca board is currently prepared to recommend a deal at a reasonable price."
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The proposal marked an improvement from the £50-a-share indicative offer – 33 per cent of it in cash – rebuffed by AstraZeneca on May 2.
Pfizer revealed that it had made a further proposal of £53.50 a share – 40 per cent of it in cash – in a letter on Friday. AstraZeneca had dismissed this as a "substantial" undervaluation, according to the U.S. company.