AstraZeneca's board said on Friday it had rejected an improved $106 billion takeover offer from U.S. drugmaker Pfizer, saying the bid which was announced just hours ago undervalued the firm.

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

(Reporting by Kate Holton; editing by Sarah Young)