AstraZeneca lost £6.75bn of its share price value yesterday as the City responded to its rejection of Pfizer’s £69bn “final” takeover bid.
Big shareholders like Axa and Jupiter voiced their disappointment at the British company’s refusal to open discussions after Pfizer upped its offer price late on Sunday.
Astra’s chairman Leif Johansson rejected the new price of £55 per share yesterday morning and spent the rest of the day touring City investors’ offices to reassure them the company was worth more in the long term as an independent business.
Pfizer declared that its fourth offer – made after a weekend of talks with Astra’s board triggered by a slightly lower bid on Friday night – was “final”, and that it would not go hostile, or make the offer directly to shareholders without the backing of the target company’s directors.
Pfizer called on Astra’s shareholders to urge their board to open talks, but the general mood in the City and in the US, where nearly half of Astra’s investors are based, was that the deal would not happen by next Monday’s deadline. That was why Astra’s share price tumbled 11 per cent to £42.87 by the end of the day. Pfizer’s shares gained 1 per cent to $29.44 in late New York trading.
After Monday, Pfizer has to wait another six months before launching another bid.
Axa, which owns about 5 per cent of Astra, said it was “very disappointed” by the UK company’s behaviour, declaring it was “not in shareholders’ interests”.
Jupiter Asset Management said it too was “disappointed”. Other investors speaking on condition of anonymity said they were also irritated by the Astra board’s intransigence. One said: “We believed it would be enough for AstraZeneca to at least start engaging with Pfizer, which is something we have told them they should be doing. The latest bid is within shot of being a good price for the company.”
Some investors pointed out that the price was attractive when set against the historic value of Astra’s shares. Astra responded by arguing that the company was on the cusp of a major transformation which rendered its previous share performance irrelevant.
One key element of the latest bid that attracted some shareholders was the increase in the cash element of the offer to 45 per cent of the price rather than the 30 per cent at which the bidding started.
However, the latest offer still meant shareholders would have had to accept 55 per cent of the proceeds in shares of a business with decidedly risky prospects. That was a point raised by other investors.
Aberdeen Asset Management said it was a “big supporter” of the AstraZeneca management but said it wanted the two sides to keep talking. “There is a lot more to this deal than just price,” said Aberdeen’s fund manager Anne Richards.
Pfizer had to convince shareholders they would be able to reduce the “high-level risk” of disruption to the business both before and after the deal.
Standard Life said the price was “some way short” of being the knockout bid the markets had expected.
The major Swedish shareholder, Investor AB, was also said to be strongly behind the decision to reject the deal. Last week, Investor AB spoke of how it invests for the long term in its companies, and was a big believer in the way Astra has turned around its business in recent years.
For the Government, the deal’s apparent demise removes a potential embarrassment as Labour has made great play of the Coalition’s reluctance to interfere with a deal that was likely to cost UK research jobs.
David Cameron repeated his view that “this is a matter for the companies to resolve themselves”, although the shadow Business Minister, Chuka Umunna, welcomed the bid’s rejection.
Aberdeen’s Ms Richards pointed out that the deal posed a dilemma for fund managers representing a wide range of shareholders’ opinions. “Some will be wanting us just to run their money and achieve the best price, but other clients feel pharmaceuticals is such a critical part of the UK economy that this deal should not happen at all. It is important for us to look at all these issues.”
For the personal finances of Astra chief Pascal Soriot, the demise of a takeover would see him kiss goodbye to a £7.5m windfall – representing the amount his personal shareholding would profit. “He has put his money where his mouth is on this decision,” said one member of the AstraZeneca camp.