LONDON (The Deal) -- The board of AstraZeneca (AZN) on Tuesday, May 20, sustained new shareholder criticism for its decision to reject a £69.4 billion ($117 billion) bid from Pfizer (PFE) as the New York bidder pointed to limited wriggle room in a clarification requested by the Takeover Panel.
AstraZeneca on Monday batted away a thrice-sweetened offer worth 5,500 pence per share, breaking down into 1.747 Pfizer shares plus 2,476 pence in cash. The London group's board argued that the bid is risky and undervalues its pipeline of drugs under development. Unusually, the board also stipulated on Monday that it was looking for a price of at least 5,885 pence per share.
Schroders, a top 20 AstraZeneca shareholder with a roughly 2% stake, became at least the third institution to express "disappointment" following complaints from AXA and Jupiter Fund Management on Monday.
"Schroders notes with disappointment the quick rejection by the AstraZeneca board of the latest offer from Pfizer and the decision of the Pfizer board to draw a premature end to these negotiations by calling their latest proposal final," said Schroders' prime U.K. equity manager Sue Noffke in a statement. "As long term shareholders, we are strong believers in AstraZeneca and the potential for its innovative growth pipeline, however, given the increase in the offer we would encourage the AstraZeneca management to recommence their engagement with Pfizer, and subsequently their shareholders."
Pfizer CEO Ian Read on Monday called on AstraZeneca shareholders to lobby the British company to change its position but it's doubtful whether they can apply sufficient pressure on chairman Leif Johansson and CEO Pascal Soriot. Some, including Neil Woodford, who recently launched Woodford Investment Management, have backed the AstraZeneca board, and Aberdeen Asset Management plc on Monday said the sweetened bid still fell short.
The New York company has until 5 p.m. on Monday under Takeover Panel rules to announce a firm intention to make a bid or retreat, unless it can convince AstraZeneca to agree to talks and request an extension to the initial 28-day deadline. Pfizer has already ruled out going hostile and on Monday called its latest proposal final.
In a statement on Tuesday, it said that after calling the proposal final it won't be able to lift it by the May 26 deadline unless a third-party intervenes or it needs to adjust the bid to ensure it doesn't slip below 5,500 pence total value because of exchange rate movements or a decline in its own price. However, if it succeeds in winning an AstraZeneca board recommendation for the 5,500 pence per share bid, it noted that it reserved the right to tweak the offer after its launch.
"If AstraZeneca ultimately decides to recommend Pfizer's final proposal and Pfizer announces a recommended offer on the terms set out in the final proposal announcement, then Pfizer has reserved the right subsequently to increase its offer at any time," the company said. "However, it is important to note that such right may be exercised only after Pfizer has obtained a recommendation from the AstraZeneca board of the terms set out in the final proposal announcement and announced a recommended firm offer on this basis."
It added: "Pfizer has also made statements in the final proposal announcement which reserve Pfizer's right to introduce other forms of consideration, vary the mix of consideration and reduce its proposal in certain circumstances."
Pfizer spokesman Andy Widge noted that regulatory or product developments could be the catalyst for Pfizer to exercise that flexibility.
Several recent pharmaceuticals transactions have employed contingent value rights - which give a target's shareholders a slice of the future upside of drugs under development - to break stalemates. These have included Sanofi's $20 billion agreement to take over Genzyme in 2011 after a five-month hostile pursuit.
A takeover by Pfizer of AstraZeneca would be by far the largest foreign acquisition of a U.K. company and Pfizer's plans prompted the U.K. government to revisit its limited powers to intervene in bids, as well as triggering plenty of talk about the need to preserve Britain's scientific base.
Pfizer offered to put 20% of its R&D workforce in the U.K. for five years. It wants to make Britain its tax domicile to benefit from the country's lower tax rate.
AstraZeneca shares by early afternoon in London were down 1 pence at 4,286.50 pence, paring earlier losses. They tumbled more than 11% on Monday.