British pharmaceuticals giant AstraZeneca has agreed a 1,320p a share cash takeover deal with Cambridge Antibody Technology that values the smaller drugs developer at £702 million.

Shares in CAT closed last week at 791p, valuing the group at just over £420 million. The shares soared 492.5p - or 62.26 per cent - to 1,283.5p in early deals today. For full details on the shares click here

The deal, first reported in The Sunday Times over the weekend, will see AstraZeneca move to establish a major international presence in the research and development of biological therapeutics and in the process set up a new business unit.

AstraZeneca is Europe's third-largest drugs developer and CAT is the biggest biotechnology company in Britain.

AztraZeneca, led by new chief executive David Brennan, already has a 19.2 per cent stake in Cambridge-headquartered CAT which it took out as part of a collaboration agreement struck in late 2004.

As it noted that its offer represented a 66.9 per cent premium to CAT's closing share price on Friday, AstraZeneca said CAT would be central to its plans to deliver an expanded pipeline of treatments in a range of areas, including respiratory ailments, oncology, neuroscience and cardiovascular diseases.

Mr Brennan said: "This acquisition represents a major long-term strategic investment by AstraZeneca in novel biological therapeutics.

"It is our intention to both expand and broaden the scope of our discovery and development pipeline and we expect that, by 2010, up to a quarter of our candidates for full scale development will be biological therapeutic agents."

Astra said its new research and development organisation, to be created as a result of the takeover, will be led from CAT's headquarters but will be distinct from its existing small molecule capability.

It added that it was guaranteeing the jobs of existing CAT employees, and had agreed a £5 million break fee with the company that is payable if the deal collapses.

Shares in AstraZeneca shed 10p to 2,847p. For more details on the shares, which currently value the drugs group at more than £45 billion, click here

AstraZeneca was advised by Goldman Sachs, while CAT took advice from Morgan Stanley.

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