AstraZeneca Rejects a Higher Bid From Pfizer

Friday morning, Pfizer increased its previous bid by about 7 percent, raising the value of the potential deal to more than $100 billion. Pfizer, the maker of best-selling drugs like Lipitor and Viagra, said it was willing to pay a combination of cash and shares equal to 50 pounds a share ($84).

If completed, it would be one of the largest acquisitions in the pharmaceutical industry, surpassing the headline figure of Pfizer’s $90 billion takeover of Warner-Lambert 14 years ago. Adjusted for inflation, however, that takeover would currently be valued at about $124 billion.

But within hours, AstraZeneca said that its board believed the terms were a substantial undervaluation and that its strategy and pipeline of drugs would make it more successful as a stand-alone company.

Market analysts say that a price of £52 to £54 a share may persuade AstraZeneca to agree to a merger. Some viewed the company’s quick rejection on Friday as a tactic meant to elicit a higher offer.

Any discussion about whether the merger made business sense was nearly drowned out by the political squabbling between the government of Prime Minister David Cameron, which has held discussions with Pfizer this week about the company’s plans for AstraZeneca, and the opposition Labour Party. The opponents accuse Mr. Cameron of selling out British jobs and drug making prowess to an American company.

But despite the infighting, Britain prides itself on being a much more open economy than France, where an offer by the American giant General Electric for a large portion of the industrial conglomerate Alstom has met stiff, unified government resistance.

AstraZeneca has an attractive portfolio of cancer drugs, an area that is a priority for Pfizer. But equally attractive is AstraZeneca’s British base, which would allow Pfizer to escape a higher American corporate tax rate and free its overseas profits from any claims by United States tax collectors. That has given opponents of the deal leverage to argue that Pfizer’s motives have more to do with its tax avoidance than with industry synergies.

 “Do we really want a jewel in the crown of British industry, our second-biggest pharmaceutical firm, to basically be seen as an instrument of tax planning in some tax planning game?” Chuka Umunna, a business spokesman for the Labour Party, told the BBC. “There is grave concern in the business community and in the sector about this transaction.” In Britain, only the drug maker GlaxoSmithKline is bigger than AstraZeneca.

A spokesman for Mr. Cameron, Jean-Christophe Gray, rejected suggestions that the government had favored one side over the other and said that any offers and acceptances were “matters for shareholders.”

The chancellor of the Exchequer, George Osborne, who has promoted Britain as a country open to foreign investors, spoke with Pfizer officials this week. In those discussions, the government has sought assurances from Pfizer that if it did acquire the British company, a significant portion of jobs and research and development activities would stay in the country.

Mr. Cameron “takes a strong interest in terms of jobs, skills and the research and development base,” Mr. Gray said.

On Friday, Mr. Cameron spoke with AstraZeneca’s chairman, Leif Johansson, though Mr. Cameron’s office declined to say who had initiated the phone call or give details of the discussion.

In rejecting Pfizer’s higher offer, Mr. Johansson said, “We are showing strong momentum as an independent company.”

Pfizer, which is based in New York and is a symbol of business prowess in the United States, publicly declared its interest in AstraZeneca early this week after making several informal takeover approaches.

 “We believe our proposal is responsive to the views of AstraZeneca shareholders and provides a sound basis upon which to arrive at recommendable terms for the combination of our two companies,” Ian C. Read, Pfizer’s chairman and chief executive, said in a statement.

In a research note Friday, Mark Clark and Richard Parkes, analysts at Deutsche Bank, said they believed that Pfizer would have to improve its offer further to complete the transaction, indicating that investors would prefer an offer of £52 to £55 a share.

AstraZeneca said that there was no certainty over the terms of any offer and that “shareholders are strongly advised to take no action.”

It is now up to Pfizer to decide whether it wants to sweeten the deal again.

On Friday, Pfizer sent a letter to Mr. Cameron to address concerns about potential job losses if the companies combined.

In the letter, Mr. Read, the Pfizer chairman, said the company would move its corporate and tax residence to Britain, base important scientific research there and employ a minimum of 20 percent of the combined company’s research and development work force in the country.

 “Ultimately, establishing the world’s largest research-based pharmaceutical company in the U.K., together with the commitments made in this letter, represent a strong indicator of the incentives that your government has created to attract successful business to the U.K.,” Mr. Read wrote.

AstraZeneca employs 51,500 people worldwide, including about 6,700 in Britain.

The British government has appointed Jeremy Heywood, a cabinet secretary and the former head of Morgan Stanley’s investment bank in Britain, and John Kingman, a senior Treasury official and the former global head of financial institutions at Rothschild, to lead discussions between the government and Pfizer over the potential acquisition.

Even from within Mr. Cameron’s Conservative Party, there were some expressions of concern. A former senior cabinet minister, Michael Heseltine, called for greater government powers to block foreign companies from taking over British companies.

 “There are so many issues about the science base, about the supply chains, about employment prospects that ought to be explored,” he told the BBC.

In 2011, Pfizer closed research facilities in Sandwich, England, leading to the loss of more than 1,500 jobs, a point that has made the bid for AstraZeneca particularly sensitive. Another case often cited here is the takeover of Cadbury by Kraft, a deal that led to job losses and the closing of a plant near Bristol.