* Pfizer sought further talks April 26 after Jan rebuff
* AstraZeneca declined to engage on earlier two occasions
* Latest in bumper wave of healthcare M&A deal-making
* Astra says offer "very significantly" undervalues group
* Astra shares jump 12 pct, Pfizer up nearly 4 pct
(Recasts first paragraph, adds fund manager, analyst comment)
By Ben Hirschler and Ransdell Pierson
LONDON/NEW YORK, April 28 U.S. drugmaker Pfizer
Inc approached Britain's AstraZeneca Plc
two days ago to reignite a potential $100 billion takeover and
was rebuffed, raising investor expectations it will have to
increase its offer to close the deal.
Pfizer said on Monday it proposed a takeover to AstraZeneca
in January worth 58.8 billion pounds ($98.9 billion), or nearly
47 pounds per share. It had contacted its British rival again on
Saturday, seeking to discuss further a takeover.
The chase was welcomed by investors in both companies, as
deal-making grips the healthcare industry. AstraZeneca shares
were up 11.7 percent at $76.69 in New York on news of the latest
offer, which would be the biggest foreign acquisition of a
British company and one of the largest pharmaceutical deals.
Pfizer shares were up 3.8 percent at $31.92 on the New York
Stock Exchange on Monday afternoon.
AstraZeneca said Pfizer's suggested offer undervalued the
company "very significantly," adding that Pfizer wanted to pay
70 percent in shares and only 30 percent in cash. AstraZeneca
urged its shareholders to take no action and said it remained
confident of its independent strategy.
"I feel pretty confident of a higher bid coming," said Neil
Veitch, global and UK investment director at SVM Asset
Management, which owns AstraZeneca shares. "I think it's more
likely than not that we'll see an agreed deal somewhere in that
52 to 53 pound range."
Buying AstraZeneca would boost Pfizer's pipeline of cancer
drugs and create significant cost and tax savings. Under British
takeover rules, Pfizer has until May 26 to announce a firm
intention to make an offer or back away.
The renewed approach comes amid a wave of mergers and
acquisitions in the sector, pushing the value of deals to $153
billion so far this year, as the industry restructures amid
healthcare spending cuts and competition from cheap generics.
"Society wants products faster, they want more products and
they want value," Pfizer Chief Executive Ian Read told
reporters. "Industry is responding to society's request for
increased efficiencies and productivity."
Read said AstraZeneca had declined to engage in talks and
the U.S. group was now considering how to proceed, but he
remained convinced that combining the two companies made
strategic sense and would benefit AstraZeneca investors.
NEW DRUG PIPELINES
Pfizer's original proposal, made to the board of AstraZeneca
on Jan. 5, would have valued AstraZeneca shares at 46.61 pounds
each - a premium of around 30 percent at the time.
AstraZeneca said the proposal comprised 13.98 pounds in cash
and 1.758 Pfizer shares for each AstraZeneca share.
"My guess is it will go for somewhere between 50 and 55
(pounds a share)," said Dan Mahony, a fund manager at Polar
Capital, who raised his stake in AstraZeneca in February last
year. "I doubt Pfizer will want to go completely hostile."
Most of Pfizer's past deals have been conducted on a
friendly basis, including its 2009 purchase of Wyeth for $68
billion. But it has been willing to play hardball if needed, as
it did in 2000 with its $90 billion purchase of U.S. rival
Warner-Lambert, with which it won full ownership of cholesterol
fighter Lipitor, the best-selling drug of all time.
Read told U.S. analysts that since the initial approach to
AstraZeneca, both companies had seen experimental drugs fare
well in trials. At the same time, Pfizer concluded it was too
difficult to pursue big deals domestically while being on the
hook for higher U.S. tax rates.
"We're coming from a position of strength, on our near-term
pipeline" of experimental drugs, Read said.
Recent favorable data includes results for Pfizer's
experimental breast cancer medicine palbociclib.
Pfizer's declaration turns up the heat under AstraZeneca
Chief Executive Pascal Soriot, who has been in the job since
October 2012 and who made clear last week he saw an independent
future for the group, flagging spin-offs of two noncore units as
one option to create more value.
Soriot has been credited with reviving AstraZeneca's
previously thin pipeline of new drugs, badly needed to offset a
wave of patent expiries on older drugs, and shares in the group
have now risen more than 60 percent under his tenure.
However, his overhaul - including an ambitious plan to move
the company's research and corporate headquarters to Cambridge,
England - is still a work in progress and he has also come under
fire from some shareholders over executive pay.
Read said it was premature to say who would lead a combined
Buying AstraZeneca would give Pfizer a number of promising -
though still risky - experimental cancer medicines known as
immunotherapies that boost the body's immune system to fight
tumors. It could also generate significant cost savings for the
Acquiring a foreign company also makes sense for Pfizer as
it has tens of billions of dollars accumulated through foreign
subsidiaries, which, if repatriated, would be heavily taxed.
The drugmaker has more recently been divesting certain
operations, while mega-mergers had fallen out of fashion in the
pharmaceuticals industry following scepticism about how well
some of them have worked.
But CEO Read said large deals could also make good sense and
buying AstraZeneca would "maintain the flexibility for the
potential future separation of our businesses."
The transaction would complement both Pfizer's innovative
drug businesses and also its established products business -
comprising older and off-patent medicines - which many analysts
expect to be eventually spun off.
In addition to using offshore cash, buying AstraZeneca would
be tax-efficient since Pfizer could redomicile to Britain and
enjoy lower tax rates, thanks to attractive incentives to
companies that manufacture and hold patents in the country.
Pfizer envisages combining the two drugmakers under a new
UK-incorporated holding company, although the head office and
stock market listing would remain in New York. But the suggested
deal has triggered worries about jobs in Britain's drug sector,
viewed as a key industry by the government.
AstraZeneca has already laid off thousands of staff as it
shrinks its cost base to cope with a fall in sales due to patent
losses on blockbuster medicines, while Pfizer has shuttered a
research site in Sandwich, southern England.
Read said Pfizer had contacted the British government about
its plans on Monday, after Finance Minister George Osborne said
on Friday that any deal was "a commercial matter between the
A spokesman for Prime Minister David Cameron told reporters
on Monday that any Pfizer takeover bid would be assessed by
"independent procedures and frameworks."
Bank of America Merrill Lynch, JP Morgan and Guggenheim
Securities are advising Pfizer, while Goldman Sachs, Morgan
Stanley and Evercore Partners are working for AstraZeneca.
($1 = 0.5948 British pound)
(Additional reporting by Ransdell Pierson in New York and Simon
Jessop in London; editing by Mark Potter, David Holmes,
Bernadette Baum and Matthew Lewis)