By Jonathan D. Rockof, Hester Plumridge and Dana Cimilluca
Pfizer Inc. has raised its offer for AstraZeneca PLC to GBP50 ($84.47) a share, valuing the U.K. drug maker at GBP63 billion ($106.43 billion), in a fresh bid for AstraZeneca backing.
The revised offer represents a premium of about 7% over Pfizer's previous bid, made back in January, and increases the cash component of the offer to about 32% from 30% previously. Under the revised offer, AstraZeneca shareholders would get 1.845 shares in the combined company and GBP15.98 in cash.
Pfizer said Friday that Ian Read, its chairman and chief executive, had contacted AstraZeneca's chairman, Leif Johansson, and that the British company had indicated it would respond after its board reviews the proposal.
AstraZeneca confirmed it had received a fresh offer that its board would consider.
Underscoring the political sensitivities on both sides of the Atlantic, Pfizer also released a letter from Mr. Read to British Prime Minister David Cameron, laying out how a deal would benefit Britain including assurances over U.K. science and jobs.
Investors initially appeared skeptical about the fresh offer, with AstraZeneca's shares falling slightly in early London trading and below Pfizer's latest offer.
However, some analysts said the fresh offer would be enough to bring AstraZeneca to the negotiating table. "Today's events force AstraZeneca's board to open formal discussions with Pfizer," said Panmure Gordon analyst Savvas Neophytou.
Pfizer's CEO said in the statement that the company had received "positive market reaction" from shareholders of both companies to Pfizer's previous offer, disclosed late last month.
Mr. Read, in a letter to AstraZeneca's chairman also published Friday, added that he had also had "productive" discussions with the U.K. government about the possible deal.
Mr. Read visited the U.K. this week and held meetings with senior government officials, including Finance Minister George Osborne and Business Secretary Vince Cable.
The letter to Mr. Cameron includes commitments to establish a major research and development hub in Cambridge--completing AstraZeneca's planned move to the university town; keeping 20% of the combined company's total R&D workforce in the U.K., and retaining manufacturing facilities at Macclesfield, in the north west of England. Pfizer also said at least two AstraZeneca board members would join a combined board and that board meetings would take place in the U.K.
Responding to the fresh offer on Friday morning, David Willetts, U.K. minister for universities and science, told BBCRadio 4 that Britain was "pressing Pfizer in a very hard-nosed way" about the country's interest in R&D.
Pfizer has also proposed to establish the combined company's corporate and tax residency in Britain, a move that would lower its tax bill considerably. But the move--a so-called inversion--would be the biggest of its kind to date, and would be likely to raise close scrutiny both in London and Washington.
The company didn't lay out any new assurances on the U.S. political risk of a deal being successfully concluded, which skeptics of the deal have flagged as a concern. The deal would be the largest inversion deal--where a U.S. company buys a smaller group in a country with a more favorable tax rate--done so far.
Late Thursday, The Wall Street Journal reported that the two drug giants had resumed talks about a trans-Atlantic merger, after Pfizer sweetened the terms of an earlier takeover offer for its British rival, citing people familiar with the matter.
Pfizer made an offer to buy AstraZeneca in January that valued the British company at GBP46.61 ($78.48) a share, or about $100 billion. After the approach was disclosed this week, AstraZeneca said it "significantly undervalued" the company.
A merger would create the world's biggest pharmaceutical company, selling drugs for most major conditions, including cancer, diabetes and heart disease. It would be one of the industry's biggest deals since Pfizer bought Warner-Lambert for $90 billion in 2000.
It could also help the companies deal with the billions of dollars in sales they are losing as blockbusters such as cholesterol fighter Lipitor face competition from generic rivals. Each company had a sales drop of 6% last year, Pfizer's to $51.6 billion and AstraZeneca's to $25.7 billion.
Mr. Read has said the primary driver behind the proposed deal is a desire to build the strongest lineup of products across each of the company's businesses, including drugs that have lost patent protection but sell well in fast-growing emerging markets.
It would also link Pfizer's targeted cancer therapies with AstraZeneca's drug candidates that aim to use the body's immune system to fight the disease. Researchers believe different kinds of drugs need to be combined to improve cancer treatment.
A deal might also strengthen each of Pfizer's three business units enough that the company would divide into separate companies, an option executives have said they are exploring.
Pfizer executives have indicated they would use some of the company's cash reserves earned and kept overseas to pay for a deal. Pfizer had $49 billion in cash and equivalents outside the U.S. at the end of last year.
Pfizer first approached London-based AstraZeneca last November, and the companies met in New York in January, AstraZeneca said Monday. At that meeting, Pfizer proposed a deal consisting of 70% Pfizer stock and 30% cash, according to AstraZeneca.
AstraZeneca said it rejected the offer on Jan. 12, because its board was concerned about the large proportion of Pfizer stock and the challenges of structuring the deal so a combined company would pay U.K. tax rates.
Pfizer approached AstraZeneca again on April 26 about doing a deal, but AstraZeneca said it wasn't interested "absent a specific and attractive proposal," the British company said.
AstraZeneca shares closed in London on Thursday at 4815 pence, valuing the company at GBP60.76 billion.
Ian Walker and Alex MacDonald contributed to this article.
Write to Hester Plumridge at Hester.Plumridge@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com
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