AstraZeneca shares rocket as US drugs giant Pfizer confirms it had second takeover bid knocked back

28th April 2014

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Confirmation from US drugs behemoth Pfizer that it has approached AstraZeneca for a second time in regards to a potential takeover has sent the FTSE 100 firm’s stock soaring writes Philip Scott.

Following last week’s media frenzy, AstraZeneca shares enjoyed another fillip today, surging by 16% to circa 4,730p by midday, after the American business issued a statement on its interest.

Pfizer had previously submitted a preliminary, indication of interest to the board of directors of AstraZeneca in January regarding a possible merger transaction.

However after what are described by Pfizer as “limited high-level discussions”, AstraZeneca declined to pursue the matter further as it is confident it can deliver value as an independent operation. But Pfizer contacted AstraZeneca again on Saturday (26 April) hoping to renew discussions only to be rejected once again.

Commenting on the possible transaction, Ian Read, chairman and chief executive officer of Pfizer, says: “We believe patients all over the globe would benefit from our shared commitment to R&D (research and development), 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.”

In a note issued by AstraZeneca today, it stated that its board concluded that the proposal very significantly undervalued AstraZeneca and its prospects.

It read: “The board highlighted its concerns regarding the proposed transaction structure, which contained a large proportion of the consideration in Pfizer shares. The Board of AstraZeneca also raised certain concerns regarding the execution risks associated with the proposed inversion structure, as Pfizer would re-domicile to the UK for tax purposes.”

The board of AstraZeneca asserted that it remains confident in the ongoing execution of its strategy as an independent company and that its successful delivery will create significant value for shareholders.

AstraZeneca shares are now up by 22% over the past year and last week analysts at Citgroup upgraded their recommendation on the stock to a ‘buy’ while UBS repeated its own upbeat view on the business. By market consensus, the group is rated a ‘hold’.

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