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Pharmaceutical giant Pfizer has said in a new press release that it has approached UK pharmacuetical maker AstraZeneca about a $100 billion takeover offer, but that AstraZeneca so far has shown no interest in doing a deal.
Pfizer made the announcement in a press release, indicating that earlier discussions had ended in mid-January, and that Pfizer tried to engage in new discussions on April 26, but to no avail.
Shares of AstraZeneca are surging 15% this morning.
In the announcement, which you can read below, Pfizer says the deal would have benefits in terms of distribution brand, and improving the company's product portfolio.
Pfizer will hold a conference call later this morning to discuss the proposal.
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Pfizer Inc. confirms that it previously submitted a preliminary, non-binding indication of interest to the board of directors of AstraZeneca in January 2014 regarding a possible merger transaction. After limited high-level discussions, AstraZeneca declined to pursue negotiations. The discussions were discontinued on 14 January 2014 and Pfizer then ceased to consider a possible transaction. In light of recent market developments, Pfizer contacted AstraZeneca on 26 April 2014 seeking to renew discussions in order to develop a proposal that could be recommended by both companies to their shareholders. AstraZeneca again declined to engage. Pfizer is currently considering its options with respect to AstraZeneca.
Pfizer's previous proposal made to the board of AstraZeneca on 5 January 2014 included a combination of cash and shares in the combined entity which represented an indicative value of £46.61 ($76.62)1 per AstraZeneca share and a substantial premium of approximately 30% to AstraZeneca's closing share price of £35.86 on 3 January 2014.
As in its previous proposal, Pfizer is considering a possible transaction in which AstraZeneca shareholders would receive a significant premium for their AstraZeneca shares, to be paid in a combination of cash and shares in the combined entity. Pfizer believes that a transaction, if proposed and consummated, would offer AstraZeneca shareholders a highly compelling opportunity to realise a significant premium to the undisturbed AstraZeneca share price as of 17 April 2014, which includes a substantial cash payment. AstraZeneca shareholders would become significant shareholders in the combined company and participate in significant value creation opportunities, including benefiting from the potential growth opportunities and operational and financial synergies that the combination of two complementary global pharmaceutical companies would be expected to generate. Pfizer is confident a combination is capable of being consummated. The transaction, if consummated, is expected to result in the combination of the two companies under a new U.K.-incorporated holding company. As a global corporation, Pfizer would expect the combined company to have management in both the United States and the United Kingdom, and to maintain head offices in New York and list its shares on the New York Stock Exchange.
The making of any firm offer by Pfizer would be subject to the following pre-conditions (which may be waived in whole or in part by Pfizer):
- satisfactory completion of a customary due diligence review by Pfizer;
- unanimous recommendation by the directors of AstraZeneca to vote in favour of the combination; and
- the directors of AstraZeneca giving irrevocable undertakings to accept any offer in respect of their AstraZeneca shares.
Commenting on the possible transaction, Ian Read, Chairman and CEO of Pfizer, said:
"We have great respect for AstraZeneca and its proud heritage as an innovation-driven biopharmaceutical business with a rich science-based foundation in both the United Kingdom and Sweden. In addition, 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.
"We believe patients all over the globe would benefit from our shared commitment to R&D, which is critical to the future success of the pharmaceutical industry, in the form of potential new therapies that help to fight some of the world's most feared diseases, such as cancer.
"The combination of Pfizer and AstraZeneca could further enhance the ability to create value for shareholders of both companies and bring an expanded portfolio of important treatments to patients. A potential combination with AstraZeneca aligns with Pfizer's current structure and fully supports its existing strategy to build world-class businesses. The combination would complement our two innovative businesses and our Global Established Pharmaceutical business, allowing us to maintain the flexibility for the potential future separation of our businesses whilst at the same time broadening our pipeline breadth and potential new product launches over coming years. We believe that a transaction would further strengthen our ability to generate strong and consistent cash flow, targeted for both investment in our business and return to shareholders, while at the same time offering an efficient operating structure and the anticipated realization of attractive synergies.
"As always, we continue to focus on value creation and will be disciplined in our approach to capital deployment. Pfizer has a proven track record of successful acquisitions and, if a transaction were consummated, would use its extensive integration experience to support a successful combination of the businesses and focus on delivering value to shareholders."
Pfizer believes the strategic, business and financial rationale for a transaction is compelling. Pfizer believes the possible combination would create a highly complementary mapping of products, pipeline and operating assets to Pfizer's new operating structure, providing additional critical mass to all business segments and strong cash flow through:
- an industry-leading combined portfolio of molecularly targeted medicines for lung cancer, including novel agents for ALK, EGFR and KRas subtypes;
- strengthened presence in breast cancer, including the ongoing phase 3 trial which combines palbociclib with Faslodex for women with recurrent, metastatic hormone-sensitive disease;
- opportunities for greater depth in immuno-oncology, including the option to combine anti-PD-L1 with palbociclib, Xalkori or Inlyta for breast, lung and renal cancer respectively. Additionally, molecules targeting PD-L1, CTLA4 and 41BB offer attractive opportunities for combination immuno-oncology therapy in several cancer indications, including lung cancer and melanoma;
- a strong complementary portfolio of important cardiovascular medicines, such as Brilinta and Eliquis and promising development stage programs, such as bococizumab (PCSK9);
- a broad, innovative commercial offering of non-insulin anti-diabetic medicines that complements Pfizer's early-stage research initiatives and capabilities in diabetes;
- a Global Established Pharmaceutical business with integrated distribution capabilities, expanded reach to healthcare providers and a broad portfolio of market-leading products generating strong and consistent cash flow; and
- a strengthened global footprint and enhanced opportunities in developing markets.
The possible transaction is expected to be accretive to Pfizer's adjusted diluted earnings per share2 in the first full year following the combination3. In addition, Pfizer has a track record of realising operational synergies and delivering meaningful value accretion for shareholders in prior transactions of a similar type and scale. Pfizer believes that synergies would be achieved through the combination of the two companies' operations and that the combination would enable greater capital efficiency and a more efficient tax structure. In particular, the currently contemplated structure under a new U.K.-incorporated holding company would not subject AstraZeneca's non-U.S. profits to U.S. tax, which would be in the best interests of the combined company's shareholders.
The completion of a possible transaction is subject to the approval of Pfizer's shareholders and is expected to be a taxable event to Pfizer's shareholders.
Pfizer reserves the right to introduce other forms of consideration and/or vary the mix of consideration and waive in whole or in part any of the pre-conditions to making an offer.
Pfizer reserves the right to make an offer for AstraZeneca at any time for less than the equivalent of £46.61 ($76.62) for each AstraZeneca share:
(i) with the agreement or recommendation of the AstraZeneca board;
(ii) if a third party announces a firm intention to make an offer for AstraZeneca which, as at the date Pfizer announces a firm intention to make an offer for AstraZeneca, is valued at a lower price than the equivalent of £46.61 ($76.62) for each AstraZeneca share;
(iii) following the announcement by AstraZeneca of a whitewash transaction4 pursuant to the Code; or
(iv) in the event that any AstraZeneca dividend is declared, made or paid in excess of what is expected by the consensus analyst forecasted dividends of 53.6 pence5 per share due to be announced by AstraZeneca on 31 July 2014, a £ for £ adjustment reduction equal to the excess amount.
The deadline set by Rule 2.6(a) of the Code (the "Deadline") requires Pfizer either:
(i) to announce a firm intention to make an offer for AstraZeneca under Rule 2.7 of the Code; or
(ii) to announce that it does not intend to make an offer for AstraZeneca, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies,
by not later than 5.00 pm on 26 May 2014, save where either:
(i) AstraZeneca and the Takeover Panel have consented to an extension of the Deadline; or
(ii) the Deadline does not apply, or ceases to apply, by virtue of Rule 2.6(b) (a firm intention to make an offer for AstraZeneca under Rule 2.7 of the Code being announced by an offeror (other than Pfizer) prior to the Deadline).
A copy of this announcement will be available on Pfizer's website at www.pfizer.com.
Pfizer will hold an analyst and investor call in respect of this announcement today at 8:30 a.m. EDT (1:30 p.m. BST). A live and recorded webcast will be available from www.pfizer.com.