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AstraZeneca Plc (NYSE ADR: AZN) stock dropped as much as 15% today (Monday) following news that the British pharmaceutical company had rejected Pfizer Inc.'s (NYSE: PFE) final takeover offer. That's the largest intra-day loss in AZN stock's history.
Pfizer upped its offer to $118 billion on Sunday, which was up from the $106 billion it had offered in early May. A merger between the two companies would have created the world's largest pharmaceutical group.
When Pfizer officials made the $118 billion offer, they also stated that this was their final attempt at a merger. AstraZeneca Chairman Leif Johansson told Reuters that he doesn't see any scenario in which the deal would be completed by the May 26 deadline that has been set under U.K. takeover rules. He also said he doesn't see the deadline being extended.
With the merger, Pfizer would have been able to create a tax base in the U.K. Currently, Pfizer pays a corporate tax rate of 27% in the United States. The corporate tax rate in the U.K. is expected to soon drop to 20%.
However, officials from AstraZeneca feared a merger would lead to job cuts and a lessened focus on research. According to Reuters, numerous British scientists and politicians opposed the deal, saying it would undermine Great Britain's science base.
"Pfizer's approach throughout its pursuit of AstraZeneca appears to have been fundamentally driven by the corporate financial benefits to its shareholders of cost savings and tax minimization," a statement from Johansson said. "From our first meeting in January to our latest discussion yesterday, and in the numerous phone calls in between, Pfizer has failed to make a compelling strategic, business or value case."
Clearly, shareholders did not hold the same sentiment, as shares of AZN tumbled in morning trading. AZN stock had been hovering near an all-time high of $82.68 during the month of May. Today, Shares dropped as low as $69.78 on the news.
Pfizer officials said that they would not pursue a hostile takeover. PFE stock was largely unaffected by the news, trading up 1% on Monday afternoon.
Now that a deal between Pfizer and AstraZeneca appears dead in the water, here's what investors can expect moving forward…