Pfizer chases AstraZeneca for potential $125 billion deal

LONDON/NEW YORK (REUTERS) - US drugmaker Pfizer Inc approached Britain's AstraZeneca Plc two days ago to reignite a potential US$100 billion (S$125 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, 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 per cent at US$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 per cent at US$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 per cent in shares and only 30 per cent 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 US$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 US group was now considering how to proceed, but he remained convinced that combining the two companies made strategic sense and would benefit AstraZeneca investors.

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 per cent 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 company.