Trust agreement may scupper Zeneca bid

Zeneca may have abandoned an attempt to trump Glaxo's £9bn bid for Wellcome because a restrictive clause in Glaxo's agreement with the Wellcome Trust meant it was unable to secure an irrevocable acceptance for the charity's 40 per cent stake.

City sources say SG Warburg, Zeneca's corporate finance adviser, met yesterday with Robert Fleming, adviser to the Trust, Wellcome's largest shareholder.

Speculation increased that Zeneca might have shied away from a bid because of the clause, signed in January, in which the Trust agreed that "unless and until the offer lapses or is withdrawn [it would not] enter into any agreement or arrangement with any person, whether conditionally or unconditionally, ... which would or might restrict our rights to dispose of the shares pursuant to the offer".

If a third party bidder is to join the fray it is expected that it will do so before Wednesday afternoon, which is the deadline for the Trust to accept Glaxo's offer in the absence of a higher bid.

In practice the takeover cannot be declared unconditional until approval of the deal is received from the US Federal Trade Commission, possibly not until next week.

Glaxo said yesterday that it would be prepared to declare the bid unconditional with 50 per cent acceptances rather than its original condition of 90 per cent, so the FTC ruling is likely to be the final hurdle. Glaxo can go into the market to buy shares from Wednesday.

It is understood that an approach from Zeneca, or any other white knight, might be dependent on an irrevocable acceptance from the Trust. With Glaxo understood to be ready to counter with a higher bid, no other bidder would want to put its head above the parapet without being certain of success.

If true, questions are likely to be raised by Wellcome's other shareholders about the wisdom of the Trust tying itself into an agreement which effectively scared off any higher bid.

The market remained unconvinced by the Zeneca rumours yesterday. Wellcome's shares closed 5p lower at 1,036p, 4p below Glaxo's cash and shares offer.

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