Major investors in the pharmaceuticals giant AstraZeneca have urged the company to start negotiating with its US rival Pfizer after it rejected a sweetened £63bn takeover bid.
Although the assurances on investment helped to soothe political concerns over the £50-per-share bid, the AstraZeneca board yesterday said it had “no hesitation” in rejecting the offer, up 7 per cent from the original £46.61 move, and declared it would not even engage in talks.
AstraZeneca’s decision came after a hastily convened board meeting in London yesterday. The British company said too much of Pfizer’s offer consisted of shares rather than cash, and criticised the fact that the Viagra maker’s rationale for the deal was based upon tax savings. However, one top five shareholder told The Independent: “This is a serious enough offer for AstraZeneca to sit down and talk. We’re disappointed with the rejection but do agree that the bid is too low – the price needs to be higher.”
Another investor said: “Yes, the bid is too low but the rejection was too swift. The first obligation of the board is to shareholders. There should have been more of a discussion before such a fundamental decision was made.”
The influential Institute of Directors also warned MPs against intervening on political grounds, insisting that the takeovers are “primarily a matter for boards and shareholders to determine, not government”.
Robin Barker, the director of corporate governance at the IoD, added: “The board of AstraZeneca has so far rejected the bid, and they should continue to be sceptical about whether a tax-driven strategy makes the takeover in the long-term interest of the company.”
Sources close to the negotiations now expect Pfizer to come back with a higher offer as soon as next week. AstraZeneca is expected to meet with key investors over the next few days.
Pfizer’s chief executive Ian Read had attempted to soothe political concerns about the impact on Britain’s skilled workforce in a letter to the Prime Minister.
He also piled the pressure on Astra’s board to set up discussions, with the clipped comment: “Although we would have liked more time to meet privately to discuss our latest proposal, I believe that our revised terms are sufficient for you to agree to meet with us.”
Mr Read told David Cameron of the virtues of the “golden triangle”of Oxford, Cambridge and London, and pledged to complete AstraZeneca’s planned £300m Cambridge campus as well as employing at least a fifth of the combined company’s total research and development workforce in the UK. Pfizer spent only about 10 per cent of its revenues last year on research and development versus Astra’s 16 per cent spend, and its record of takeovers is one of heavy job cuts.
Yesterday, Pfizer committed itself to offering at least two AstraZeneca board members a place on the new company’s non-executive committee. It also agreed to hold board meetings in the UK.
In the latest bid, the cash element has been raised to 32 per cent from 30 per cent. Astra shares closed down 7p at 4,808p.