Biotech Values

[DewDiligence]

AZN rejects PFE—at least for the time being; this PR contains background info on the discussions between the two companies:

http://www.astrazeneca.com/Media/Press-releases/Article/20141228--Statement-regarding-Pfizer-announcement

On 26 April 2014, Ian Read, Chairman and CEO of Pfizer, contacted Leif Johansson, the Chairman of AstraZeneca for the first time since January 2014. In this discussion, the Chairman of Pfizer did not make a specific proposal regarding an offer to acquire AstraZeneca, but nevertheless Pfizer requested that both companies issue a joint statement, prior to the market open on 28 April 2014, announcing that they had entered into discussions regarding a combination. The Board of AstraZeneca considered this request and concluded that, absent a specific and attractive proposal, it was not appropriate to engage in discussions with Pfizer.

Background

On 25 November 2013, AstraZeneca received an initial contact from Ian Read on behalf of Pfizer, in which he proposed that the two companies discuss a combination. Leif Johansson, Chairman of AstraZeneca, expressed confidence in AstraZeneca’s prospects as an independent business. Nevertheless, AstraZeneca agreed to an exploratory meeting and subsequently met with Pfizer on 5 January 2014 in New York.

At this meeting, Pfizer made a preliminary and conditional proposal regarding a possible offer for AstraZeneca (the “Proposal”). The Proposal comprised £13.98 in cash (30%) and 1.758 Pfizer shares (70%) per AstraZeneca share, representing a value of £46.61 per AstraZeneca share, based on the closing price of Pfizer shares of $30.52 on 3 January 2014. The Proposal also involved a new US listed and headquartered holding company.

The Board of AstraZeneca concluded that the Proposal very significantly undervalued AstraZeneca and its prospects. 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. As a result, AstraZeneca wrote to Pfizer on 12 January 2014 rejecting the proposal and did not engage further with Pfizer.