Pharmaceutical company AstraZeneca on Friday flatly rejected drug maker Pfizer's sweetened takeover bid — worth $106 billion US — just hours after it was levelled, describing it as inadequate.

After being rebuffed twice, Pfizer Inc., the maker of Viagra, made a third attempt for the London-based rival on Friday, offering £50  ($92 Cdn) a share in cash and stock, a 7.3 per cent increase on its last bid. The deal would be the biggest-ever foreign takeover of a British business.

But AstraZeneca's board said the terms were not right and the price substantially undervalued the company. The Anglo-Swedish firm said the potentially lucrative "pipeline" of new drugs it is developing would be disrupted by a takeover and its possible consequences.

Board rejects proposal

"Pfizer's proposal would dramatically dilute AstraZeneca shareholders' exposure to our unique pipeline and would create risks around its delivery," said Leif Johansson, the chairman of AstraZeneca. "As such, the board has no hesitation in rejecting the proposal."

Pfizer's bid early Friday comes amid a spate of mergers and acquisitions in the pharmaceutical industry, which is moving to consolidate gains as the patents on some top earners expire.

"There is a highly compelling strategic, business and financial rationale for combining our businesses, with significant benefits for shareholders and stakeholders of both companies," Pfizer CEO Ian Read said in a statement announcing the offer.

But the move quickly became political. Critics fear the takeover could mean big job cuts, and the potential loss of stature in the science sector in Britain has become a political issue.

Pledge to keep tax residence in U.K.

Cognizant of the concerns, Pfizer sent a letter to British Prime Minister David Cameron, promising to keep the company's corporate and tax residence in England. It said that the "golden triangle of Oxford, Cambridge and London" — where a significant portion of British scientific research is based — would represent a vital component of the deal.

Cameron responded within a few hours, declaring that while the government regards the potential takeover bid as a matter for the respective boards, the government was "determined to secure great British science, research and manufacturing jobs in the life sciences sector."

"The government will consider these proposals carefully as to whether they offer sufficient protection of our priorities," Cameron said.

Britain is investing millions of pounds into boosting science in the so-called "Golden Triangle" in the country's southeast. Only last month, London Mayor Boris Johnson announced a new investment organization meant to attract life sciences corporations and to facilitate collaboration between companies and researchers.

Besides access to the intellectual capital, some analysts say the main impetus for Pfizer's interest in AstraZeneca is a wish to limit a potential tax hit. Analysts suggest Pfizer has earned and held billions of cash overseas that it would have to pay taxes on at relatively high U.S. rates should it be brought back.

Political football

"Once the cash is offshore, the potential tax cost of repatriating it to the U.S. makes it much more attractive to find other homes for it — such as making foreign acquisitions," said tax specialist Heather Self of the law firm, Pinsent Masons.

Critics quickly took note and wondered whether Pfizer had any commitment to Britain at all.

"This does look a little bit like a transaction which has tax planning as a rationale," the opposition Labour Party's shadow business secretary, Chuka Umunna, told the BBC.

Pfizer is the world's second-biggest drugmaker by revenue, with sales of $51.6 billion last year and staff of 77,700.

AstraZeneca PLC ranks eighth, with sales of $25.7 billion last year and 51,500 employees worldwide. AstraZeneca was created in 1999 through the merger of Sweden's Astra and Britain's Zeneca.