News of the offer saw AstraZeneca stocks rise sharply, at the same time Pfizer's share were up 2.7 percent around 12:30 p.m. Pfizer said it had made an initial approach in January but AstraZeneca rejected the offer saying it "significantly undervalued" the company.
Pfizer said the deal was "a highly compelling opportunity" for AstraZeneca's shareholders. The cash and shares deal represented a 30 percent premium on AstraZeneca's stock price in early January.
AstraZeneca said it was confident in its strategy and said it would continue to create value for its shareholders.
"The Board remains confident in the ongoing execution of AstraZeneca's strategy as an independent company," it added.
Pfizer, in the meantime, said that post-merger it plans to establish a new holding company in the U.K. with management both in the U.S. and U.K. The company headquarters would continue to be New York and shares would be listed on the NYSE.
AstraZeneca manufactures drugs in 16 countries focusing on treatments for diabetes, cancer and asthma as well as antibiotics.
"We have great respect for AstraZeneca and its proud heritage," said Pfizer chairman and chief executive Ian Read.
"The strategic, business and financial rationale for a transaction is compelling," he added.