LONDON, May 19- British drugs giant AstraZeneca rejected on Monday a final takeover bid from US rival Pfizer worth $117 billion, saying it undervalued the firm and created uncertainty and risk for shareholders.
Shares in AstraZeneca plunged by about 14.0 percent in early trading.
Pfizer had made an improved and final offer worth 85 billion euros or £69 billion on Sunday, pitched at £55 per share, but said it would not proceed without a recommendation.
The battle is the latest in a series of recent huge moves by companies in the pharmaceutical and health care sectors to create world-scale alliances.
The Pfizer bid has taken on strong political overtones in Britain where there is concern that the centre of strategic decision-making might move abroad, that jobs might be cut and research in Britain eventually scaled back.
“We have rejected Pfizer’s final proposal because it is inadequate and would present significant risks for shareholders, while also having serious consequences for the company, our employees and the life-sciences sector in the UK, Sweden and the US,” said AstraZeneca chairman Leif Johansson.
On Friday, Pfizer, which makes Viagra, had lifted its proposal to £53.50 per share, from the previous level of £50.
However, AstraZeneca declared that it would only be prepared to recommend an offer of more than 10 percent above the £53.50 level, indicating a price of £58.85 or £3.85 more than the latest offer on Sunday.
“The final proposal is a minor improvement which continues to fall short of the board’s view of value and has been rejected,” said Johansson.
He added: “As an independent company, the entire value of AstraZeneca’s (drugs) pipeline will accrue to our shareholders. Under Pfizer’s final proposal, this value would be significantly diluted.”
Under the latest bid, Pfizer shareholders would own approximately 73 percent of the new firm, while the British group’s shareholders would hold 27 percent.
– Tax issues –
AstraZeneca, which has repeatedly snubbed Pfizer’s takeover attempt, attacked the bid for offering to establish its corporate and tax residency in England.
Pfizer wants to create a new pharmaceuticals giant which would be domiciled for tax purposes in Britain.
“Pfizer’s approach throughout its pursuit of AstraZeneca appears to have been fundamentally driven by the corporate financial benefits to its shareholders of cost savings and tax minimisation,” added Johansson.
This appeared to be a reference to big tax charges which would fall due on profits held abroad should Pfizer decide to transfer them to the United States.
“From our first meeting in January to our latest discussion yesterday, and in the numerous phone calls in between, Pfizer has failed to make a compelling strategic, business or value case,” Johansson said.
“The board is firm in its conviction as to the appropriate terms to recommend to shareholders.”
“AstraZeneca has created a culture of innovation, with science at the heart of its operations, which will continue to create significant value for patients, shareholders and all stakeholders of AstraZeneca.”
Pfizer had stated on Sunday that its latest offer was the fourth and final approach, adding that it would not go hostile.
The US group added that it hoped the final takeover bid would put pressure on the company’s board to engage with the offer.
Johansson added that AstraZeneca chief executive Pascal Soriot and chief financial officer Marc Dunoyer had held “lengthy” talks with Pfizer over the weekend.
“Pascal Soriot, Marc Dunoyer and I had a lengthy discussion with Pfizer over the weekend about the proposal Pfizer made on Friday evening at a value of £53.50 per share,” he said.
“During this discussion, Pfizer said that it could consider only minor improvements in the financial terms of the Friday proposal.
“In response, we indicated, even assuming that other key aspects of any proposal had been satisfactory, that the price at which the board of AstraZeneca would be prepared to provide a recommendation would have to be more than 10 percent above the level contained in Pfizer’s Friday proposal.”
Politicians and unions have expressed concern that a tie-up would lead to job cuts and damage Britain’s position as a research and development hub.
British Prime Minister David Cameron recently called on Pfizer to give more assurances that its takeover bid is in Britain’s national interest.