£63bn bid rebuffed by Astra’s directors

Fears grow US pharma rival may now make hostile move

ASTRAZENECA’S board took just three hours to slap down an improved £63bn bid from Viagra maker Pfizer.

Responding to Pfizer’s second, sweetened proposal, Astra’s board said it had ‘no hesitation’ in rebuffing the approach.

‘The financial and other terms described in the proposal are inadequate, substantially undervalue AstraZeneca and are not a basis on which to engage with Pfizer,’ the company said in a statement.

Astra’s directors were also unimpressed by the relatively small cash element of the offer and the perceived ‘tax-driven’ motivation for a tie-up. Chairman Leif Johansson added that a deal could disrupt Astra’s efforts to produce new drugs, which he said would create value for investors if the company remains independent.

The rejection came a matter of hours after Pfizer submitted a £50a-share cash-plus-shares offer, valuing the British firm at £63bn.

The cash element of the proposal is just £15.98, with the remainder to be made up of Pfizer shares.

Analysts at UBS said the proposal was effectively a ‘starting point for negotiations’ with the Astra board, indicating Pfizer could return with a third, improved offer.

But other City pundits said Pfizer might now seek to bypass directors and go ‘ hostile’ by addressing shareholders directly. The likelihood of succeeding with a hostile bid was boosted by reported comments from an unnamed major investor, who said he was ‘ disappointed’ that Astra was not listening to the offer.

The prospect of the largest takeover in British history has also sparked political controversy.

Whitehall veteran Lord Heseltine said the Government should have more power to block foreign takeovers. Shadow business minister Chuka Umunna accused Pfizer of a ‘poor record’ of keeping on staff after big deals, warning that Britain’s science industry could lose its ‘jewel in the crown’.

But the Institute of Directors corporate governance chief Dr Roger Barker said: ‘ Government intervention to block an acquisition would send a disastrous signal internationally that Britain was no longer a free and open trading nation where the market will drive business, but an economy increasingly driven by the edicts and whims of politicians who choose to intervene on political grounds.’

But he said the Astra board should continue to be ‘ sceptical’ about the tax motives for Pfizer’s offer. The US company has some £37bn of cash reserves stashed abroad. Repatriating the money would incur a large tax bill in the US, where federal corporation tax is a nominal 35pc.

But spending the money on Astra would allow Pfizer to change its tax domicile to the UK under US law, meaning it would be subject to a corporation tax rate of 21pc, falling to 20pc next year. Industry sources warned allowing Pfizer to go ahead with the plan could open the door to the firm creating a ‘brassplate’ operation in Britain, with investment and jobs focused in the US.

Umunna pointed to the company’s record of cutting jobs after big deals, as well as the controversial closure of the lab in Sandwich, Kent, that invented Viagra, at a cost of 1,500 jobs.

Pfizer boss Ian Read has reas- sured the Prime Minister and Business Secretary Vince Cable that the firm would not halt Astra’s planned research facility in Cambridge.

He has also offered a pledge that 20pc of the firm’s research and development team would be in the UK. But opponents of the deal point to US confectionery giant Kraft, which reneged on a promise to keep a UK factory open after buying Cadbury.