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AstraZeneca rejects Pfizer US$106 bil. takeover bid

LONDON--British drugs giant AstraZeneca on Friday rejected a sweetened US$106 billion takeover bid from U.S. rival Pfizer, hitting out at the “inadequate” offer as it battles to remain independent.

The rejection came hours after Pfizer had lifted its informal cash and shares bid to the equivalent of 76 billion euros, as it seeks to strengthen its research in cancer and slash its tax bill.

The Viagra maker offered #50 (US$84) per AstraZeneca share, higher than the previous bid worth US$99 billion.

“The financial and other terms described in the (new) proposal are inadequate, substantially undervalue AstraZeneca and are not a basis on which to engage with Pfizer,” the British group said in a statement.

Analysts said Pfizer was now likely to come back with a hostile bid, which however may still not force through a deal.

“It seems the main driver behind the deal is the desire of Pfizer to shelter US$70 billion of its cash pile from U.S. taxation rules, and that doesn't seem a sufficiently good reason to do a deal if you are AstraZeneca,” said CMC chief strategist Michael Hewson.

He added: “The Pfizer CEO has talked up the prospects of a deal being good for the creation of new drugs but AstraZeneca already has a healthy pipeline relative to Pfizer, and reducing competition in the pharmaceutical sector seems a funny way to generate growth in new drugs.”

AstraZeneca attacked the new bid for offering a “large proportion” payable in Pfizer shares, noting also that the combined firm would still seek to establish its corporate and tax residency in England.

“Accordingly, the board has rejected the proposal,” the London-listed firm added.

Pfizer has highlighted the considerable tax advantages from the transaction, which would create a new UK-incorporated holding company.

Outlining his company's defense, AstraZeneca chairman Leif Johansson said it “continues to invest significantly in research, development and manufacturing in the UK, Sweden and the U.S..”

He added: “We are showing strong momentum as an independent company, in particular with our exciting, rapidly progressing pipeline, which the board believes will deliver significant value for shareholders.

“Pfizer's proposal would dramatically dilute AstraZeneca shareholders' exposure to our unique pipeline and would create risks around its delivery. As such, the board has no hesitation in rejecting the proposal.”

AstraZeneca shares traded down 0.35 percent at #47.98 around midday in London.

Earlier Friday, Pfizer chief executive Ian Read said “the industrial logic for a combination between Pfizer and AstraZeneca is compelling.”

He added that the combined company would bring together “powerful and world-leading” research expertise in key areas such as oncology, inflammation, and cardiovascular and metabolic disorders.

Read also vowed in a letter to British Prime Minister David Cameron that Pfizer would complete AstraZeneca's proposed research and development facility in Cambridge, southern England, should the deal go ahead.

He added that 20 percent of the new group's research and development (R&D) staff would be based in Britain.

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