Pfizer abandoned its attempt to buy AstraZeneca for nearly $118 billion on Monday as a deadline approached without a last-minute change of heart by the British drugmaker.
The decision ends a month-long public fight between two of the world’s biggest pharmaceutical companies that sparked political concerns on both sides of the Atlantic over jobs and corporate tax maneuvers.
British rules now require an enforced cooling-off period. AstraZeneca could reach out to Pfizer after three months and Pfizer could take another run at its smaller British rival in six months, whhether it is invited back or not.
Pfizer’s move came two hours before a 5PM GMT (12PM ET) deadline to make a firm offer or walk away under UK takeover rules. Its decision to quit the stage, at least for now, was widely expected after AstraZeneca refused its final offer of $92.70 per share.
Pfizer in a short press release:
“Following the AstraZeneca board’s rejection of the proposal, Pfizer announces that it does not intend to make an offer for AstraZeneca.”
The biggest U.S. drugmaker promised it would not go hostile by taking its offer directly to AstraZeneca shareholders, leaving the fate of what would have been the world’s largest ever drugs merger in the hands of its target, whose board would have had to make a complete U-turn to get a deal done.
Ian Read, Pfizer chairman and chief executive:
“We continue to believe that our final proposal was compelling and represented full value for AstraZeneca based on the information that was available to us.”
Pfizer’s final offer was at a price that many analysts and investors previously suggested would bring AstraZeneca to the table for serious negotiations.
But in rejecting an earlier offer of $89.89 a share as undervaluing the company, the British group indicated it needed a bid more than 10 percent higher, or at least $98.50 per share, for its board to consider a recommendation.
Pfizer urged AstraZeneca shareholders to agitate for engagement and several expressed disappointment at its intransigence, although others — encouraged by AstraZeneca’s promising drug pipeline — backed the firm’s standalone strategy.
AstraZeneca Chairman Leif Johansson welcomed Pfizer’s decision to back down, which he said would allow the British company to focus on its growth potential as an independent company.
What happens next will depend upon whether AstraZeneca’s share price deteriorates in the coming weeks and how hard its shareholders push for it to revisit a deal with Pfizer.
BlackRock, AstraZeneca’s biggest shareholder, backed the board’s rejection of Pfizer’s $92.43 a share offer, but urged it to talk again in the future.
The proposed transaction ran into fierce opposition from politicians in Britian, Sweden — where AstraZeneca has half its roots — and the United States over the likelihood that the acquisition would lead to thousands of job cuts.
Ultimately, it was price and the lack of room for eleventh-hour maneuvering by Pfizer that killed the deal.
Pfizer had several reasons for taking aim at AstraZeneca for what could have been its fourth mega-merger in 14 years.
Highest on the list appeared to be Pfizer’s desire to take part in a recent trend of so-called tax inversions, under which it could reincorporate in Britain and pay significantly lower corporate taxes. Pfizer would also be able to use tens of billions of dollars it has parked overseas, avoiding high U.S. taxes for repatriating the huge cash pile.
Pfizer also had its eye on a promising portfolio of drugs in AstraZeneca’s developmental pipeline, especially several potentially lucrative cancer medicines.
It was this pipeline that AstraZeneca management used to make its case for Pfizer significantly undervaluing the company.
Chief Executive Pascal Soriot went as far as making a 10-year forecast for a 75 percent rise in sales by 2023.
“As we said from the start, the pursuit of this transaction was a potential enhancement to our existing strategy. We will continue our focus on the execution of our plans, bringing forth new treatments to meet patients’ needs and remaining responsible stewards of our shareholders’ capital.”
The merger would have restored Pfizer as the world’s largest drugmaker by sales, a position it relinquished to Swiss-based Novartis when billions of dollars in annual revenue evaporated after its top-selling cholesterol drug Lipitor began facing generic competition in 2011.