In a move that will ramp up the pressure on AstraZeneca, the New York-based pharmaceuticals company is poised to come back with a new offer, after its cash-and-shares bid of £46.61 a share, valuing AstraZeneca at £58.8bn, was rebuffed.
The proposed deal – already the biggest foreign takeover bid in UK corporate history – is also facing mounting opposition, with critics saying it would deal a savage blow to the UK's prominent science sector.
On Thursday night Lord Sainsbury, the former science minister and an influential voice in British business, urged the UK government to publicly oppose any takeover bid from Pfizer. "It is clear to me that this proposed takeover is going to deal a devastating blow to our profile in the pharmaceuticals area, which I think is going to be critical in the next 30 years," he told the Financial Times.
He described the deal as undesirable and said it could cause long-term damage to Britain, given Pfizer's track record of cutting jobs and stripping assets. He urged the government to "give real leadership and say we don't want something like this to happen".
Bloomberg reported that a new bid could value AstraZeneca at more than £50 a share, that it could include a larger cash component, and that it might be tabled as soon as next week. City analysts have predicted that the offer could even be raised to the mid-£50 level, which would value AstraZeneca at up to £70bn.
AstraZeneca shares ended the day 3.2% higher at £48.15, the highest close since Pfizer's approach was first reported a week and a half ago.
Such an improved offer would address some of the concerns raised by shareholders and the AstraZeneca board.
While stressing the board's confidence in the Anglo-Swedish firm's future as an independent company, chairman Leif Johansson has effectively laid out the conditions under which AstraZeneca would be prepared to negotiate. In a video message posted on the company's website, he said the board rejected Pfizer's approach because it "very significantly undervalued" AstraZeneca and its prospects. It also has concerns about the large proportion of Pfizer shares in the deal and the proposed tax structure of the combined company.
Under Pfizer's plan, the merged group would be incorporated in the UK, to protect it from the 38% rate of corporation tax in the US and take advantage of the lower UK corporation tax rate of 21%, dropping to 20% next year. The world's largest drug company is also keen to acquire AstraZeneca's promising pipeline of new cancer treatments – a new generation of drugs that use the body's immune system to fight tumours.
Pfizer's Scottish-born boss, Ian Read, has returned to the US after a busy 48-hour visit to London, where he met most of AstraZeneca's major shareholders and senior political figures including chancellor George Osborne, the universities and science minister David Willetts and Sir Jeremy Heywood, the cabinet secretary. He also had phone calls with Vince Cable, the business secretary, and others.
While AstraZeneca has until now refused to enter negotiations with Pfizer, some of its main shareholders have indicated that they would support a deal if Pfizer – which has grown through acquisition – improves its offer.
Pfizer's approach has raised fears of thousands of job cuts in Britain. The US company's closure of the bulk of its research centre at Sandwich in Kent, where Viagra was developed, is still fresh in many memories. It led to 1,500 job losses.
Pfizer kept 700 scientists in Sandwich, who develop cancer and other medicines, as well as 160 researchers in Cambridge working on pain, sensory and regenerative treatments, and 300 people at a packaging site in Havant near Portsmouth. AstraZeneca employs about 6,700 people in the UK out of 50,000 worldwide and plans to move its headquarters to Cambridge from London by 2016.
Analysts at Credit Suisse have said: "The strategic logic and financial uncertainty around AstraZeneca's ability to deliver on its strategy alone make a deal more than likely."
Elsewhere, the FTSE 100 drugmaker Shire, which is known for its attention-deficit/hyperactivity drugs and has been touted as a potential bid target for Botox maker Allergan – or even AstraZeneca, as part of its defence strategy – underlined its appeal when it reported strong first-quarter results and upgraded its forecast for earnings per share to "mid-to-high 20%" growth.
Talking about the "merger frenzy" in the industry, chief executive Flemming Ornskov said he was choosing to focus on growth, innovation and profitability. "That's what I can control and will continue to focus on," he said.
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