Pfizers unsuccessful takeover of AstraZeneca - Essay Example

The Pfizer and AstraZeneca Attempted Merger In the early part of high-level meetings were held between Pfizer and AztraZeneca for talks of a possible acquisition. Pfizer has expressed interest in buying the latter and has proposed a 58 billion-price tag for the offer. The bid was refused and it was only in April when talks began in earnest again. This was achieved because Pfizer publicly announced its intentions amidst disinterest on the part of AstraZeneca, which was forced into the negotiating table.

The bid price was increased to 63 billion and the pressure on AztraZeneca prompted the UK government to take interest and eventually intervene with the series of committee hearings in the UK Parliament involving heads of the two drug companies. The failed takeover has affected the share price of AztraZeneca more than Pfizer. The company stock price rose sharply prices during the process, beginning the day after the takeover bid was announced (BBC 2014). The uptick would only dramatically decrease in the very day the bid was rejected in May 19.

The share price, however, rebounded the day after, paving the way for better and stronger performance as the details of the failed bid became known. The same could not be said in the case of Pfizer. Its share price was tagged at 31.12 before the takeover bid and gradually fell to 28.75 by the end of May as the negotiations drew to a close (Yahoo Finance 2014). The attempted takeover came on the heels of Pfizers intent to merge with AstraZeneca for the purpose of relocating its headquarters to the UK, using it as a tax domicile, avoiding high corporate taxes in the US in the process (Drawbaugh 2014).

This trend has been going in recent years for several pharmaceutical companies in the US. This year alone, thirteen tax-inversion deals have been completed, with US drug companies buying foreign counterparts in order to relocate their tax bases abroad (Lorenzetti 2014). Pfizer has made this particular motivation public when it made its bid for AstraZeneca. The corporate tax in the UK is 21% and is expected to fall to 20% in 2015 whereas the US charges corporations 35% (Farell 2014).The UK government was dragged into the issue because the takeover became a matter of public interest, requiring intervention.

The takeover came to mean, for the UK polity, a risk for the country because of the prospect of job loss as evidenced in previous merger and acquisition cases. Policy makers, for example, recall the case of Kraft’s Cadbury acquisition. After the takeover, the company failed to honour its promises during the merger to make the UK the net beneficiary in terms of jobs (Ahmed 2014). AstraZeneca is also considered an important UK brand while the drug industry remains an important contributor to the UK economy.

Its merger with Pfizer was therefore met with strong political opposition. Labour leader Ed Miliband, for example, called for a closer look at the deal through an expanded public interest test, citing that the Pfizer bid could have long-term science and industrial impact on Britain (Watt 2014). The takeover also highlighted policy issues, particularly that of the governmental authority to intervene in mergers and acquisitions. Unlike countries like the US, Australia and Canada, the UK is barred from intervening except when the takeover or merger involve matters of defence and national security.

The UK has now instituted new rules such as the “cooling-off” period where both parties could not engage in another bout of merger negotiation within as much as six months.ReferencesAhmed, K., 2014. Pfizer: What will the government do? BBC News, [online] 28 April. Available at: . [Accessed on 8 November 2014].BBC., 2014. AstraZeneca shares soar after Pfizer confirms bid talks. BBC News, [online] 29 April. Available at: . [Accessed on 8 November 2014].Drawbaugh, K., 2014. Pfizers Proposed Mega-Deal Involves A Controversial Way Of Cutting Its Tax Bill.

Business Insider, [online] 29 April. Available at: . [Accessed on 8 November 2014].Farrell, S., 2014. AstraZeneca shares fall as Obama thwarts tax inversion deals. The Guardian, [online] 23 September. Available at: . [Accessed on 11 November 2015].Lorenzetti, L., 2014. Tax inversion target companies hit by U.S. crackdown. Fortune, [online] 23 September. Available from: http://fortune.com/2014/09/23/tax-inversion-target-companies-hit-by-u-s-crackdown/. [Accessed on 8 November 2014].Watt, N., 2014.

Miliband: Cameron is a cheerleader for Pfizer takeover of AstraZeneca. The Guardian, [online] 4 May. Available at: . [Accessed on 8 November 2014].Yahoo Finance, 2014. Pfizer Inc. (PFE). Yahoo, [online] April-May 2014. Available at: . [Accessed on 8 November 2014].