May 1 (Bloomberg) -- Pfizer Inc.’s $106 billion bid for AstraZeneca Plc faces increased resistance as the unwilling target’s chairman listed the reasons the offer was rejected and British lawmakers began efforts to block the buyout attempt.
The offer “significantly undervalued” AstraZeneca, Chairman Leif Johansson said today in a video posted to the company website.
Pfizer, the biggest U.S. drugmaker, offered 46.61 pounds a share in cash and stock in January, and London-based AstraZeneca declined to pursue negotiations. On April 28, Pfizer made the offer public and said it wanted to restart discussions. AstraZeneca was also concerned that the offer was too heavily weighted in stock, and about the proposed tax structure of the new entity, Johansson said in the four-minute video.
“AstraZeneca has a clear innovation-based strategy, focused on achieving scientific leadership and returning to growth,” he said. “The board is also confident in our ability to successfully execute that strategy as an independent company.”
The deal may run into barriers set by U.K. officials worried about the loss of jobs and research investment.
Pfizer executives likely will be summoned before parliament’s Business Committee to explain their intentions, Adrian Bailey, the committee’s chairman, said April 29. Yesterday, Julian Huppert, a Liberal Democrat member of parliament, submitted a motion calling for ministers to “act as necessary to protect employment and skills in the U.K.”
“There is a great deal at stake here,” Huppert said in a statement. “This would be the largest takeover of a British firm. I want to make sure AstraZeneca retains its position in the U.K. It is extremely important for those people employed by the company and our economy generally.”
Under the terms of Pfizer’s offer, a deal would create a company incorporated in the U.K. for tax purposes and run out of New York, where Pfizer is based. The U.S. company has until May 26 to make an offer for AstraZeneca, or say that it won’t bid, under U.K. takeover rules.
On a conference call with reporters, Pfizer Chief Executive Officer Ian Read said he wouldn’t commit to preserving British jobs, although he added the U.K. was an attractive jurisdiction in which to do business.
AstraZeneca shares have climbed 32 percent since Jan. 1. That growth shows that shareholders have endorsed the company’s strategy, Johansson said.
The stock rose 1.1 percent to 4,715.50 pence at 11:37 a.m. in London.
Read met with U.K. government ministers April 29 to discuss a potential takeover, according to a person familiar with the meetings. Read emphasized the American company’s plans to carry out research, development and manufacturing in the U.K. as well as the appeal of the British tax system, the person said.
Pfizer’s reputation in Parliament isn’t helped by its 2011 decision to close a research hub in the coastal town of Sandwich, southeast England, with the loss of 2,000 jobs. AstraZeneca is moving to a new global headquarters and research center in Cambridge, which is represented by Huppert.
Bailey’s committee will discuss on May 6 whether to hold hearings with executives.
“I view it with great concern,” Bailey, who is a Labour lawmaker, told reporters. “We have a company which closed its operations in Sandwich for tax purposes and now says it’s buying a British company for tax purposes.”
If the bid goes ahead and is subject to a European Commission investigation, the U.K. may ask for it to be referred back on public interest grounds, at which point ministers could block it. Or the government could try to amend the Enterprise Act, which allows ministers to intervene to protect national security, media plurality and the stability of the financial system.
Jean-Christophe Gray, spokesman for Prime Minister David Cameron, called AstraZeneca’s research center in Cambridge “a significant part of the U.K.’s developing science skill base.”
“Would you expect senior figures in government to take close interest? Of course,” Gray said in London today.
--With assistance from Thomas Penny in London.