US drugs giant Pfizer has confirmed it has contacted AstraZeneca over a possible multi-billion pound takeover.
Pfizer said it made an initial approach in January, but after "limited high-level discussions" AstraZeneca discontinued the talks on 14 January.
However, it said recent market developments had prompted it to approach AstraZeneca for a second time.
"AstraZeneca again declined to engage. Pfizer is currently considering its options," Pfizer said in a statement.
Pfizer's statement this morning is a love letter to AstraZeneca's shareholders.
It talks of "a highly compelling opportunity to realise a significant premium" and offers a "substantial cash payment".
Pfizer also pledges that AstraZeneca shareholders would be able to take up significant rights in any combined company.
Judged by other pharmaceutical deals, any bid of this size would come at a premium of around 30%, presumably on AstraZeneca's undisturbed 17 April share price of £37.81.
With a present market value above £50bn, AstraZeneca would cost Pfizer around £65bn.
Pfizer has the cash, with a multi-billion dollar war chest held off-shore to shield it from American tax laws.
If AstraZeneca does not engage, and it hasn't so far, this bid could turn hostile.
It will be quite a battle.
If the deal went through, it would mark the largest takeover of a UK firm by a foreign company.
Pfizer said its initial offer in January was a combination of cash and shares worth £46.61 per AstraZeneca share, worth £58.8bn in total.
At the time, it represented a 30% premium to AstraZeneca's share price, although AstraZeneca's share price has since increased and on Monday morning it jumped nearly 15% to £46.88p
Pfizer said the deal was "a highly compelling opportunity" for AstraZeneca's shareholders.
It said if the takeover went through, the combined firm would have management in both the US and the UK, but would list its shares on the New York Stock Exchange.
"We have great respect for AstraZeneca and its proud heritage," said Pfizer chairman and chief executive Ian Read.
Pfizer said it would only make a firm offer if AstraZeneca directors voted unanimously in favour of the deal.
"The strategic, business and financial rationale for a transaction is compelling," it added.
Hostile move?Buying AstraZeneca would give Pfizer, which makes Viagra among other drugs, access to a number of cancer and diabetes drugs.
Continue reading the main storyHowever, Justin Urquhart Stewart, head of corporate development at Seven Investment Management, told the BBC the price Pfizer is offering was still too low to secure a deal.
"It's too close to what it is priced at in the market," he said.
"They've tried to talk to the management and gain agreement but that's not happened so they are considering now going directly to the shareholders".
Citi analyst Andrew Baum said he believed there was now a 90% chance that Pfizer would acquire AstraZeneca for at least around £49 a share.
Linda Yueh, the BBC's chief business correspondent, notes that AstraZeneca is a key UK firm in the area of research and development (R&D) and also in exports.
"AstraZeneca's £7bn of drugs sold every year accounts for a whopping 2.3% of British goods exports," she added.
AstraZeneca has eight sites across the UK and around 6,700 employees. However, it has already laid off thousands of staff as it shrinks its cost base to cope with a fall in sales due to patent losses on blockbuster medicines.
In April, it posted a drop in first quarter profits after its earnings were by hit by patents expiring on some of its older medicines.
End QuoteAstraZeneca's £7bn of drugs sold every year accounts for a whopping 2.3% of British goods exports."
Pre-tax profits in the quarter fell to $638m (£380m), down from $1.3bn in the same period last year.
Pfizer has made other major acquisitions, its most recent being the $68bn (£40.4bn) purchase of Wyeth in 2009.
However, this would mark its biggest foreign acquisition.
It would also be the largest foreign takeover of a British firm, beating some of the more recent deals which include:
- O2 bought by Spain's Telefonica for £18bn in 2005
- Cadbury bought by US-based Kraft for £11.5bn in 2010
- Alliance Boots bought by US investment firm KKR for £11.1bn in 2007
- BAA bought by Spain's Ferrovial for £10.3bn in 2006
- Powergen bought by Germany's E.on for £9.6bn in 2002
However, the BBC's business editor, Kamal Ahmed, warned Pfizer's takeover approach could turn into a lengthy battle.
"If AstraZeneca does not engage, and it hasn't so far, this bid could turn hostile," he said.
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